When will smartphones replace our wallet?
Don't bank on it happening any time soon.
I was out for brunch on Sunday at a neighborhood cafe with friends when I recalled the Near Field Communication (NFC) mobile payment trials I'd taken part in the last couple of years. The biggest pain point was I had to use a handset provided specifically for the test, other than my own. In fact, I can't even remember the phone model I used for the October 2007 trial, where the device had an EZ-Link and NFC-enabled chip that doubled as an e-purse. It was a fugly phone and I dreaded taking it out of my pocket. More recently in April 2009, I was recruited for the Visa payWave program, which deployed the better-looking Nokia 6212 classic handset.
Hardware compatibility
While the promise of micropayment (transactions involving small sums, such as paying for groceries at a supermarket or a Latte at Starbucks) using a mobile phone sounds promising, there are several hurdles to cross before the payment facility can be considered mass market-ready. The first is that it'll need to work with existing handsets.
The easiest solution to that is an NFC sticker embedded with a radio frequency identification (RFID) chip. This is the wireless enabler that can store, process and authenticate information over very short distances with a compatible console or reader. That may not be the most glamorous fix, but until devices with NFC built-in become mainstream, the method above is still relatively quick and easy to deploy.
The other option is to use an accessory. In the US, Intuit and Mophie have introduced the Complete Credit Card Solution, a credit card reader which works with the iPhone 3G and 3GS. Square, founded by Twitter co-founder Jack Dorsey, also has a similar reader that plugs into the audio jack of the iPhone, but it can also be used on a BlackBerry and Android. What the peripheral does is process the credit card payment, geotag the location and email an electronic receipt to the buyer.
Point of sales
The second is that retailers need to be onboard with point-of-sale (POS) terminals available. Obviously, a trial also means that a limited number of partners are involved, although the Visa payWave had a spread of merchants equipped for the test run.
The three-month Visa payWave tryout demonstrated several teething issues. The POS terminals would usually be placed at the cashier, which meant you had to walk to the reader to personally authorize the payment on the phone. This is different from the current situation (in most restaurants anyway) where a server does the walking while you continue chatting with your friends at the table.
But the bigger question, is why would retailers adopt electronic payment when the current systems are working fine? Bigger establishments probably face fewer issues financing such a venture, but smaller outlets may have to consider their bottom line first. Yet such small outlets would be the ones whose clientele are active users of smartphones and would be the early adopters of such technology.
Security concerns
The third is that of security. While I have friends who'd rather keep their money at home rather than in a bank, I'm not one who loses sleep over making purchases or paying bills over the Internet. That said, the minimum assurance to users is that is the mobile payment facility as secure as our current systems and that a recourse avenue is available should anyone want to dispute a charge later.
There's also the threat of malware and viruses attacking mobile phones. Banks and financial institutions have to have the right authentication and security in place and users need to be aware of basic safety measures. For DBS customers in Singapore, users are protected by the bank's Money Safe Guarantee program where it'll replace the customer's money if his account is compromised, or if there are unauthorized m-banking transactions, as reported by our sister site ZDNet Asia.
Getting there
Although numerous trials have taken place in Singapore the past few years, micropayments on mobile phones still remain a distant reality. We're not on the same playing field as our Japanese friends. Sure, there are mobile applications for banking, Breeze by Standard Chartered being one of them, but I still can't tap-and-go as much as I'd like.
But we're getting there. In Singapore, the Contactless e-Purse Application (CEPAS) aims to make Network for Electronic Transfers (NETS) and EZ-Link, the two dominant players for micropayments in the city-state, interoperable. The former is seen mainly in retail, while the latter is used primarily for public transport payments.
According to a recent ZDNet Asia article, electronic transactions are on the climb with a compound growth rate of 14 percent between 2004 and 2008. The consultancy firm, which released the report, also said the e-money industry will see further growth as the Singapore government spearheads relevant initiatives. Though, for some of us, this can't happen fast enough. I still can't pay for KFC with NFC almost three years since I joined the trial group.
Latest comments
It already happens in Japan ...and in the near future it will happen in the US as well...We already have tap and go as this has been around for some time now....When Im back home its always so cool because I forget how helpful it is to be out on a jog and have my mini card with me, stop at a store to buy a gatorade swipe my card and the cashier had me a receipt and Im out the door "soo fast unlike here in the Philippines where if i use a card I might as well be writing out and old fashion check because its going to take a long time with double or triple copies of everything to sign ....."Gheeeezzz already"
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