Pay by Mobile Phone Wherever, Whenever? the Mobile Wallet Steps Closer to Ubiquity

In Japan, they keep finding more things to do with their mobile. Not content to chit chat, download ringtones, or text message each other in staccato blasts, the kids and others have been using their phones to pay for convenience items, too. This evokes an image of the future where everyone, everywhere, just may leave a wallet at home. Mag stripe readers be gone--it's all in the wrist! Granted, it happened in the country of eight islands on the back of an existing ticketing application for public transportation that, basically, nestled an RFID chip within the phone. And Japan's population density and other cultural factors, including gadget fever, helped make the phone more than a voice portal. Still, the use of a "digital wallet for the subway," (also available in London and on trial here in NYC) ultimately led to using mobile phones for retail and it could happen here, notes Jonathan Collins, senior analyst RFID and contactless technologies, ABI Research, London. In tutorial mode, Collins points out that radio frequency identification, much like sonar, uses specific radio frequencies to uniquely identify an object in space. This capability is a key one behind the recent rise of digital wallet applications. Another protocol generating buzz is near field communications (NFC). Using a slightly different frequency, NFC forces signals to travel shorter distances, but allows them to be read by a receiving device with an operating system and applications on it--that is, computers or, these days, cell phones. While comparatively few phones come with this embedded chip today, that will be changing according some who spoke with ABA BJ. This exchange of smart device to smart device allows payment capabilities to occur. Japan's experience Popularity of mobile pay in Japan can be largely attributed to the strategic will and market clout of mobile giant NTT DoCoMo, as widely reported in payments-oriented trade publications. In addition to the stored-value capabilities being offered, the carrier introduced and heavily promoted credit purchase capability for its contactless payment service called Osaifu-Keita within the last year. The convenience is a draw, but maybe, too, fewer consumers in places like Japan fret about dropped calls, making them more than willing to move onto additional services. (According to an article written by Andrew Cole, president CSMG Adventis, Boston, U.S. wireless brands are still disliked even as penetration here closes in on 50%. Yet other analysts point out that service, like network speed, is improving all the time, and all we need here is one good success story to render irrelevant past image issues.) While the technology is mostly worked out, the business models are still being sorted out. "In Japan, DoCoMo had 80% of the subscriber base for wireless services and was able to pull Visa and issuers in line to influence the rapid development of the infrastructure at merchant locations," explains Javelin Strategy and Research Senior Analyst Bruce Cundiff. In Europe and Africa, likewise, where great distances and/or leapfrogging technologies have put users on the fast track, mobile phone providers are very active in mobile payments, according to Johann Dreyer, CEO, S1, Atlanta. Mobile gets tested In the U.S., a field trial by Visa was successfully conducted last December in which 150 Atlanta Thrashers and Atlanta Hawks season ticket holders with both a Chase-issued Visa credit account and a Cingular wireless account made payments at contactless readers supplied by ViVOtech at concession stands throughout the arena, notes Pam Zuercher, vice-president of product innovation, Visa, San Francisco. (Fans also downloaded content like wallpapers, screensavers, and video clips of their favorite players). This pilot, which gave Visa useful details about what kinds of devices customers would accept for paying at the point of purchase, said that paying with a cell, or downloading coupon information from a poster onto the mobile phone, seemed to connect with test group participants. …