In some parts of the world, paying for items with your smartphone is old news. But when will mobile payments come stateside? That depends on how broadly you define m-commerce. “Anything you can do online with your laptop”—buy products, check bank accounts—“people will increasingly do over their mobile phones,” says Nick Holland, senior analyst with Yankee Group.
More interesting is using a smartphone in place of a credit or debit card:
- Starbucks lets you buy coffee from an iPhone or Android phone linked to a Starbucks card.
- Institutions such as Charles Schwab and JPMorgan Chase let you use your cellphone to snap a photo of a check to make an electronic deposit.
- Square Inc. makes a tiny device that attaches to a smartphone and allows it to accept credit cards.
But the biggest action may be in near-field communication (NFC), which uses an embedded chip to allow short-range data transmission. Transactions are completed by tapping one device against another. There are few NFC phones today, but Frost & Sullivan anticipates 863 million, or 53 percent of handsets, will be NFC-capable by 2015. Companies are lining up to get in on the action:
- AT&T, Verizon, and T-Mobile have launched an NFC payment system called Isis. The partnership makes the technology available to 200 million consumers.
- Google has announced the NFC-based Google Wallet, which works with Android phones. The app stores multiple credit cards or a prepaid card.
- Apple is reportedly tweaking its EasyPay system to accept NFC payments, fueling speculation that the next-gen iPhone will be NFC-ready.
More transformational could be mobile payments in developing areas such as rural Africa, says Ezra Levine, Senior Of Counsel for Morrison & Foerster. “There aren’t bank branches in these locations, and not many people have bank accounts,” he explains. “But they have cellphones. So cellphones are emerging as a means of transferring monetary value, and telecoms are replacing the function of banks.”
M-commerce observers raise questions about security and privacy. But mobile transactions are about as secure as any secure online transaction. In general, “they use the same infrastructure, and transmissions are encrypted,” Holland says. “Smartphones will increasingly be targets of malware. But software companies are already developing security apps.”
Privacy could still be a concern, suggests Obrea Poindexter, Of Counsel at Morrison & Foerster. “There’s information captured when you use your credit card, and also when you use your cellphone,” she notes. “Now that information can be combined.”