You're running late and craving that morning coffee, but the long line in front of the barista makes you want to turn around and go without. People are fumbling for change or dragging out debit cards, even for small purchases. Isn't there a better way to pay for something?
For more and more consumers, the answer to that question is going to be yes. A whole host of players -- retailers, credit card companies, payment services, telecom giants, consumer electronics firms, and even transit authorities -- are joining forces to develop and promote cutting-edge technologies for mobile payments.
Think about how quickly that coffee line would shrink if all you had to do was wave your smartphone in front of a point-of-sale (POS) reader. That payment technology is already here. More phones are being equipped with Near Field Communication (NFC) chips, one of the prime mobile payment approaches now being rolled out.
The global research firm Berg Insight estimates that the worldwide installed base of NFC-ready POS terminals will jump from just 3.9 million units in 2011 to 43.4 million in 2017 -- an annual growth rate of nearly 50 percent. The penetration rate is projected to be highest in North America, where 86 percent of terminals could be NFC-ready by 2017.
NFC lets devices share information at a distance of less than 4cm and at a maximum communications speed of 424kbps. The bidirectional capability makes it ideal for establishing connections with a simple touch.
(Source: NFC Forum)
Looking at mobile payments as a whole, Forrester Research predicts that annual transactions will grow at a hefty compound annual rate of 48 percent to reach $90 billion in the US alone by 2017. Forecasters say the bulk of that spending will be so-called proximity payments, the kind that consumers make at POS terminals in stores, at transit stations, and at vending machines, as opposed to paying a credit card bill via smartphone.
Behind the surge
The reasons for the increased adoption of mobile payments boil down to three key factors: speed, ease of use, and enhanced security. American Express says payments made through contactless mobile payment technology (such as NFC or RFID systems) are 63 percent faster than cash transactions and 53 percent faster than credit card purchases. That can make a big difference to a commuter scrambling to make a train. On the convenience side, the digital wallets now being offered by such companies as Google, PayPal, Square, and Isis organize your credit and loyalty cards in an app on your smartphone, so you can get rid of that bulging leather wallet.
Taking portability a step further, Walt Disney Co. is experimenting with the MagicBand, a wristband with an embedded RFID chip. Guests can use this cloud-linked MagicBand to enter their Disney Resort hotel room, buy food and merchandise, and accelerate access to theme park attractions. From a marketing standpoint, the device also can provide important data on consumer purchasing trends.
Proponents of mobile payments are also striving to add security features beyond even those created for credit cards, which spawned PINs, embedded smart chips, and numerous account verification techniques. With contactless mobile payments, you can now activate smart chips wirelessly. The Isis digital wallet, for example, is protected by a unique four-digit PIN that the consumer chooses. Payment card credentials are stored on a secure element chip embedded in the smartphone's subscriber identity module (SIM card), and constantly changing cryptographic codes prevent counterfeiting. At any time, you can quickly suspend your digital wallet remotely from a smartphone with a call to your wireless carrier or a visit to the digital wallet website.
For global travelers, mobile payment technology offers benefits in both security and convenience. Travelers avoid the risks of dealing with unfamiliar currencies, and the cloud sorts out exchange rates in real-time.