NEXT Money
Pocket Change
The race is on to transform your smartphone into your wallet.
BY DAN MACSAI
THE JAPANESE call it osaifu keitai (cell-phone wallet).
Flash your phone virtually anywhere you go for almost any purchase and it’s automatically
logged into a digital expense
report. Eat frequently at McDonald’s? Tap your phone to pay and
your all-in-one debit card/receipt
tracker/loyalty program may
instantly offer you 10% off.
Today, if you want to enjoy
these benefits, you have to go to
Japan. But after years of talk,
wireless carriers, banks, startups, and handset makers are
now actively working to transform Americans’ cell phones
into mobile wallets. The goal:
to snag a share of the processing fees associated with the
$3.2 trillion in annual retail
credit-card charges, and to turn
the $1.2 trillion in cash and
check spending into digital
transactions.
For the past five-plus years,
Visa and MasterCard have used
near-field communications
(NFC) chips in tap-to-pay credit
cards and key fobs. Now they’re
embracing mobile phones as
well. Later this month, Visa will
release an iPhone case (devel-
oped with Dallas-based Device
Fidelity) that makes the handset
compatible with tap-to-pay
consoles. This follows Master-
Card’s similar entry this sum-
mer, when it started marketing
tags (developed with Atlanta-
based First Data) that stick to
phones. “Consumers already use
phones for online payments,”
says Josh Peirez, MasterCard
Worldwide’s chief innovation
officer, referring to downloaded
songs and software. “The goal
is to get them comfortable
doing the same thing in the
physical world.”
The interim offerings will
have a decidedly short shelf life.
Nokia has announced that it
will include NFC chips in all its
2011 smartphones, effectively
forcing Apple, Research in
Motion, and other rivals to
follow suit. “Stickers and stuff
are welcome bridges,” says
Gerhard Romen, Nokia’s direc-
tor of mobile financial services,
“but demand is growing, and
full implementation is what
makes a technology go forward.”
Analysts estimate NFC will
become ubiquitous within the
next three to five years, which
will give wireless carriers new-
found leverage in determining
the future of the mobile wallet.
Indeed, AT&T, Sprint, T-Mobile,
and Verizon are reportedly
working on a joint-payments
initiative. (All either declined to
comment or couldn’t be reached.)
“Not only do they distribute the
physical devices and ‘own’ mil-
lions of customers,” says Philip J.
Philliou, of payments-consulting
firm Philliou Selwanes Partners,
“but they also understand how to
do payments—billings, collec-
tions, maintaining accounts—
on a massive scale.”
That said, carriers are
unlikely to go it alone. In Japan,
a primarily cash-based society,
Photograph by SUE TALLON
