By Scott Henry
For years, industry pundits have talked about the day when the ubiquitous mobile phone would function as an electronic wallet for any payment cards consumers or business travelers would want to use. But competing interests and industry inertia have held things back.
Now, a number of potential game-changers are surfacing that could finally provide sufficient impetus for market acceptance.
Recent reports that AT&T Inc., Verizon Wireless and T-Mobile USA may work with Discover Financial Services and Barclays PLC to test a smart-phone, contactless payment scheme is one enticing development (for more information, see "Have NFC payments reached tipping point," The Green Sheet, Aug. 23, 2010, issue 10:08:02).
Another intriguing possibility is the persistent rumor that Apple Inc. may introduce near field communications (NFC) into its next-generation iPhone.
The parallel development of compatible industry standards for contactless cards and NFC has many anticipating that the United States can break out of its mag stripe-only mentality. But we seem to have been stuck in an interminable cycle of "pilots" that never exit the testing phase, even though the technology has proven to be sound.
A certain amount of hesitation is understandable. After all, merchants, issuers and terminal manufacturers all were burned to some extent by the stalled effort to convert the U.S. payment system to smart cards.
Those few merchants who supported the effort were left high and dry, while the majority saw no incentive to invest in new payment technology that seemed to render issuers and acquirers schizophrenic, at best.
When it comes to mobile wallets, things get even more complicated. Not only is there the tug and pull among issuers, acquirers and merchants, but you also have to reconcile the wants and needs of wireless service providers and phone suppliers.
Everybody wants a piece of the pie, there are myriad revenue-splitting and card-branding issues to resolve and nobody seems in a hurry to concede anything.
But those hurdles don't make the prospects any less tantalizing.
Recently, the daily newspaper, amNewYork, reported that usage of contactless "tap and go" cards throughout the city's taxi system has doubled in the past year.
And this occurred without any promotion by the city's taxi authority. Reporting on data from VeriFone Transportation Systems, which serves about 60 percent of all taxis in the city, "More than 853,000 cab rides were paid for with smart cards last month, or about 20 percent of all trips covered with a credit card," the report said.
In a report released in January 2010, the Federal Reserve Bank of Boston estimated that 25.7 percent of consumers possess a contactless credit card and that 21.7 percent possess a contactless debit card.
When you consider that a contactless card may represent one of the three to five cards the average consumer tucks in his or her wallet, the New York taxi data is even more impressive. Not only do consumers realize they possess a contactless card, but they also know how to use it with little, if any, guidance.
If the AT&T, Verizon and T-Mobile venture proves true, MasterCard Worldwide and Visa Inc. may finally have the incentive needed to move forward on mobile payments and figure out a way to learn to live in a revenue-sharing world with service providers and handset suppliers.
If that's not incentive enough, there's also the prospect that PayPal Inc., the alternative payment leader, may move ahead of them. PayPal has already teamed with an interesting company named Bling Nation, which provides consumers with contactless stickers for their mobile phones that they can use to complete PayPal transactions in-store at participating merchants.
But even if we get card brands, issuers, and cell phone suppliers and services on board, that still leaves the question unanswered about when merchants will be willing to make the move to employ the card acceptance technology needed to make mobile payments a reality.
Scott Henry is Director, North America Product Marketing, for VeriFone Inc. He can be contacted at firstname.lastname@example.org.
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