Mobility optimize

Will your phone ever realistically replace your wallet?

Patrick Gray is hesitant to jump on the mobile payments system bandwagon until some of the current problems have been resolved. Do you think a wallet-less future is possible?

For the last decade, ever since mobile phones became a fixture in every pocket, various companies have been talking about using these devices as a replacement for one's physical wallet.

The promise

The promise sounds compelling: rather than carrying around a mobile phone and a bulky wallet loaded with cash and credit cards, your smartphone takes the place of the wallet. Instead of digging for change or an appropriate card, proponents of mobile payments envision a customer swiping their phone, making a few taps on the screen, and quickly paying for the purchase.

In addition to the obvious consumer benefit of presumably leaving one's wallet at home, marketers begin to salivate at the possibility of exchanging other data with a consumer's mobile phone. Just like the barcoded loyalty program cards, the smartphone could be used to track and identify a customer's previous purchases and provide even deeper data.

As smartphones have become increasingly personal, retailers could (presumably with permission) gather anything -- from stores in which a customer usually shops to email addresses and contact information for that consumer's friends -- all as part of the payment transaction. Just as Facebook and the various other social networks today mine, package, and sell personal data in exchange for a "free" service, retailers envision exchanging coupons or other promotions in exchange for personal data.

The problems

The recent push by several of the big names in technology makes mobile payments appear to be fairly new, but the technology has been in the experimental stages for years, with companies like Nokia allowing users with "dumb phones" to perform payment transactions with vending machines in a wide-scale test. While I'd love to leave my wallet and its bulging mass of credit cards, loyalty cards, identification, and (occasionally) cash at home, I see two major hurdles toward widespread mobile payment adoption.

The first problem faces most new technologies, and it's the classic "chicken or egg" phenomenon. Why would a consumer pay extra for a mobile payment-equipped device when most retailers can't accept mobile payments, and why would a retailer install the necessary equipment when most consumers won't buy the devices?

With the big names in tech pushing mobile payments rather strongly, this argument may become moot; however, I can't envision a scenario where we can routinely "leave the wallet at home" in the future. We will likely still require identification for driving a car, boarding an airplane, and getting our frequent traveler points when checking in at the hotel.

Perhaps mobile payments will slim down our wallets, but I can't see them eliminating them altogether. Mobile payments might be nice, but if I'm stuck carrying a few forms of ID, a credit card or two for those vendors who don't accept mobile payments, and a wad of cash, eliminating only 10-20% of my wallet isn't very compelling, especially in light of the other major problems with mobile payments.

In addition to only partially fulfilling the dream of leaving the wallet at home, today's mobile payment solutions are clunky at best. The ultimate vision of a quick swipe of the mobile phone remains compelling, but the reality is that consumers must evaluate whether their phone supports a given retailer's system, pull out their phone and potentially unlock it, open an appropriate payment application, swipe their phone, enter a complex password, verify payment, etc. With the current systems, mobile payment seems about as efficient as the scourge of long grocery store lines everywhere: writing a check. When you lather on the potential data mining that retailers are so hungry for, I'd rather swipe my trusty card, take two seconds to sign the receipt, and be on my way.

There's a long list of second tier problems with mobile payments, such as having your phone-based "wallet" run out of batteries, security risks of storing cash and payment capabilities on a connected device subject to all manner of downloaded nastiness, and incompatibilities among the various hardware and software systems from different competitors. Leaving your wallet at home may sound appealing, but the wallet-less vision of the future is far from the partial wallet, limited availability, unwieldy usage present.

For consumers and enterprises that might be interested in deploying this technology, it's certainly one worth watching. There seems to be a critical mass of investment behind the technology that may iron out some of the above problems, but I'd be hesitant before betting the ranch on any particular mobile payment system until the above problems have a solution in sight. Do you agree? Share your insight in the discussion thread  below.

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About

Patrick Gray works for a global Fortune 500 consulting and IT services company, and is the author of Breakthrough IT: Supercharging Organizational Value through Technology, as well as the companion e-book The Breakthrough CIO's Companion. Patrick has...

45 comments
CharlieSpencer
CharlieSpencer

"Will your phone ever replace cash, debit cards, and credit cards?"

DT2
DT2

I think it depends on your definition of "future". Remember when ATM/Debit cards first came out? There were very few ATM machines and even fewer vendors that could process them as a debit. Now almost every merchant can work with them, even the vendors at the Farmer's Market, and there are ATM machines on just about every corner. As for checks - We're still using the check refill order that I recieved about ten years ago. The last, and about the only, check I wrote was for my dentist and that was only because I got a 5% discount for doing it. One can even purchase (actually it might be free) a plugin dongle for your iPhone or Andriod phone that will allow you to swipe credit/debit cards. Direct transfer via bluetooth will be next, if its not already here. What I'm waiting for is the flying cars we were promised. I know there are a couple out there but they're lacking in performance and very expensive. And, where are the friggin' sharks with laser beams!

job
job

I am surprised by the lack of vision here. The problems Patrick raises are easily overcome. Off course the wallet can be repleaced. ID and other critical information can be taken care of with ample security and backup even with todays technologies. Cloud services spring to mind. As for the chicken and egg analogy; it really boils down to the rooster. That's the noisy guy on the sideline in case you wonder.

majimoto
majimoto

countries like kenya have proven that it is possible with service providers like safaricom,airtell,yu and orange earning huge revenues as a result.yes it is possible.

Gisabun
Gisabun

Do people really want to put all their eggs in one basket? You lose your phone, you lose more than just the phone. It's like having your home land line, TV and Internet with one provider. If the connection dies you are scr?wed.

StevenDDeacon
StevenDDeacon

At the TechCrunch NYC 2012 DISRUPT Conference US Federal CTO Todd Park announced a new initiative under "Digital Government" strategy for "The Presidential Innovation Fellows" named "The 20% Campaign". The 20% Campaign is designed to provide a country-wide electronic monetary system all accessed with mobile smart devices, smart cards, and other methods (which could be as easily tracked by the Federal Government NSA, DHS, FBI, and DoD just as credit and debit cards are today). See Presidential Innovation Fellows: The 20% Campaign @ http://www.whitehouse.gov/innovationfellows/20campaign The video "TechCrunch | Sound Bites" of Federal Government CIO Steven VanRoekel and CTO Todd Park discussing five new government technology initiatives under the White House program "Presidential Innovation Fellows" may be found @ http://www.linkedin.com/news?viewArticle=&articleID=5609668688341897264&gid=4387833&type=member&item=119007795&articleURL=http%3A%2F%2Ftechcrunch%2Ecom%2Fevents%2Fdisrupt-ny-2012%2Fsound-bites%2F%3Fsnapid%3D31018&urlhash=A9kV&goback=%2Egmr_4387833%2Egde_4387833_member_119007795 Under the MyGov, Blue Button of America, and Open Data Initiatives; your personnel information would be made available to whom ever the US Government deems necessary. See "Presidential Innovation Fellows" program @ http://www.whitehouse.gov/innovationfellows Don't you feel safer and free from Federal Government and Private Sector Corporate Conglomerate invasions of privacy?

jhenry
jhenry

It's frustrating enough at ATMs where people cannot do multiple transactions without logging out, pushing the card back in, logging on, do one transaction, repeat, repeat, repeat. Now picture these techno idiots in front of you at a check out - what's going to be in your pocket?

gevander
gevander

[quote]I can???t envision a scenario where we can routinely ???leave the wallet at home??? in the future."[/quote] You should have said "near future". Any science fiction fan can tell you: SF authors have been writing about wallet-less futures for at least the last 40 years. If you can't "envision" this possibility - can't see how it [i]could[/i] happen - maybe you should be writing about other things. As the technology advances, people and companies address all the shortcomings you mentioned. You don't think it is [b]possible[/b] for your phone to be used as an identity "card"? Why not? All the same information stored on the magnetic strip of every card you have could just as easily be stored in the magnetic media inside your phone. Or it could be stored in the cloud and accessed by your phone. All that is missing is the "orders of magnitude" increase in security requirements to make it [i]feasible[/i]. (Because "possible" is not always "feasible".) All your arguments are feasibility based. As more people and business WANT to move the data out of their wallets, people and companies will invest time and money in making the electronic wallet future feasible as well as possible.

lk_bellsouth.net
lk_bellsouth.net

After having had my debit card hi-jacked twice in 2011, which I no longer have, cash is King. For a phone to replace my wallet is at best a novel, albeit totally silly, idea. Only those who like to play with toys and take financial risks will be suckered into this line of participation. For this type of idea to realize fruition there has to be a number of people that have a lot of time on their hands which, IMO, they could put to better use.

Adrian Watts
Adrian Watts

Cash is accepted everywhere, by everyone. Electronic cash has been an idea for decades, it's just not going to happen in any useful form anytime soon. We already have a form of e-cash in eftpos cards but they are unsuited for small transactions due to the percentage paid to the card companies, and they are never going to give up their revenue stream for small transactions. These apps bypass the eftpos card companies so do not incur the percentage drain; small transactions incur a higher percentage fee than large trasactions due to minimum charges so a large top up of an app costs the app owner less than dozens of smaller charges at point-of-sale. Unfortunately the apps now fail the ubiquitousness test i.e. different app for each place. Unless there is some way to either roll all these apps into one, which would automatically create a new eftpos like company, there needs to be a way to automatically launch the correct app for where you are, add in 20-30 places, each with their own app, and you have a security nightmare. Putting the security concerns to one side (but not ignoring the blue whale in the room) it would be possible to automatically launch an app when you get near the end of the queue, using near-field communication to trigger the correct app, although that would irritate some people checking facebook. Combine that with a pre-pincode you could enter whilst queuing i.e. i'm about to pay for something and i am who i say i am so just authorise the payment when i get there and this should speed up use dramatically to the time it takes to swipe. Shops should like it as it would reduce the time required to make change which translates to fewer staff on tills with no reduction in throughput. Add in the ability to pre-approve certain payments e.g. your daily bus fare or starbucks and it could become more convenient than cash. Just don't expect it anytime soon.

Snak
Snak

This technology is inevitable. However it will not attract the main user base until it's free to use (and it will be), we've done away with the clunky unlock - load app procedure and all you need to do is swipe the phone itself across a data terminal. That technology is already there - the mobile phone reports its postion to the satellite and the satellite 'knows' which phone it is with no intervention from the user at all. All the data terminal has to do is ID the phone. When we've perfected the technology so that the phone itself 'knows' who is holding it, then there'll be no stopping this. Your phone will be your ID, your bankroll, your driving licence etc. Silver linings always have their clouds however. This makes it very easy to governments to turn citizens into non-people, simply by switching it off.

Karel.deWaal
Karel.deWaal

If you travel and get stuck in East Africa you pay with Air Time. Extracting money to your phone from your band and transferring it as air time for day to day payment is already an reality in East Africa. No wallet, no cash and no smart phone needed!

vorr1234
vorr1234

This brings back memories of the time in the late 1990s when I worked on multiple smartcard projects which included real pilots runs for both Visa and MasterCard that were meant to replace cash and small valued transactions (ie

HypnoToad72
HypnoToad72

As of this moment, it's still the case that your credit card's magnetic stripe contains unencrypted data and a card reader costs $20. Get something that can read magnetic fields from a sufficient distance, and voila. I thought that every 2% usage fee by the credit card company would go toward pragmatic things, like new cards with updated systems... Seems moot now. Given the number of articles out there about concerns of bluetooth and wi-fi not being the best protected... Heck, just be wary all the time. It's emotionally draining but this is the new normal. The old normal wasn't so great either, but I don't see things getting any better.

a.portman
a.portman

How many people lose their phone? How many lose their wallet? Winner LEATHER! Could epayment from a phone replace the half a dozen plastic cards in my wallet, yes. But the wallet, no.

mike
mike

Steamroller system. Everybody (Luddites excluded) who knows about it wants it - many with reservations - and those reservations will be resolved because of its advantages. I can remember a few years ago needing fuel for my car in France at 2:00 in the morning but the only stations open were pay at the pump and needed chip and pin; my card had no chip - no fuel :( . Now I prefer pay at the pump. Get it right - then I want it!

bboyd
bboyd

Probably even higher adoption in South Korea. Kids swiping their phones boarding trains and other places. Figure adoption is just a matter of time and also think that single purpose devices will come along with them.

suzgruba
suzgruba

Writing from the female perspective...Google Wallet is pretty dang cool. Will it replace my purse or wallet? Wallet, maybe, but not the purse. Unless they come up with mobile lipstick.... Seriously, I think eventually we will have everything on our phones, drivers license, insurance cards, credit and debit cards, you name it! Europeans have been using the mobile wallet for years, we are just behind because of all the power struggles between banks & credit card companies.

Jordon
Jordon

Drivers license, debit and credit cards, a few dollars and some business cards. I wouldn't mind removing the debit and credit cards, but considering vendors are charged a fee by the bank for accepting plastic, I refuse to use credit/debit for small transactions. I assume the same goes for electronic transfer of funds with a phone. So that leaves the drivers license, a few dollars and business cards. Nope, can't do it.

Joe_Wulf
Joe_Wulf

I seriously doubt it. - IF there is a well-designed, nicely usable multi-function phone (i.e. like an android or iphone of today) - IF it has a wealth of robust download'able apps that are secure (i.e. UNLIKE android or iphone of today) where 99.99999 percent of them are well-vetted and provably malware/crimeware-free - IF the banking/credit-card/merchant industries have cleaned up their act to where 'A' fraudulent transaction occurring within one years timeframe is a notable criminal event When the state of things reach that point, I'll consider it.

JoeyO506
JoeyO506

i would rather see a phone that fits in a card slot in my wallet.

Slayer_
Slayer_

If even a basic data plan now + cell contract can cost 100 dollars... Carrying my wallet around is free, I could be mugged every month and still save money vs using my cell phone. Actually, I'd rather give my money to a mugger, at least they are honest about robbing you.

SKDTech
SKDTech

I don't even trust those wand things that are available in some areas and those can at least be kept in an RF shielded container when not in use.

TNT
TNT

I haven't heard the phrase "wallet-less future" before for, I think, the obvious reasons mentioned in the article: "We will likely still require identification for driving a car, boarding an airplane, and getting our frequent traveler points when checking in at the hotel." None of that means the future for mobile payments is dim, however. While I wouldn't want to give my phone to a server at my favorite watering hole to pay my bill, I certainly don't mind hitting the funds transfer button at the check out counter of my local coffee shop. The wallet will be necessary until we begin embedding identity chips in our bodies, and until then we can enjoy other alternative payment methods.

Slayer_
Slayer_

Doubtful, You would have to carry a lot of phones, and you would have to have a pawn shop handy to keep converting your phone to cash. And I doubt the pawn shop will pay you what you paid for the phone. Doesn't seem like a good idea to me.

CharlieSpencer
CharlieSpencer

The dongle is cheap, but check the fine print on the TV ads. There's a 2.5% or 3% charge for each transaction processed.

CharlieSpencer
CharlieSpencer

Those huge revenues are coming from their customers' pockets. Why should I pay someone to process a phone transaction when I can use cash for free?

Jordon
Jordon

The other day I purchased something from a drug store and the transaction took all of 5 seconds. Granted, the app was already open, I opened it in the car before I went in. But a couple of seconds after I placed my phone on the reader, the receipt was printing. From what I understand, if I had not previously opened the app, all I would have needed to do is enter my pin number after placing my phone on the reader.

Jordon
Jordon

If I lose my wallet, my cash and cards are gone. If I lose my phone (which is always locked) just get me to a computer and I can find it by its GPS. If I can't get to it, I can send a signal to erase everything. If I can get close, I can send a signal that initiates a siren.

beaverusiv
beaverusiv

I would much like to see it go the opposite way; have several devices do a single task, securely, quickly, and stable. An EFTPOS card, a phone card, a camera card and a txting card. I like the arrangement we have here: our banks own the EFTPOS companies. That's how you sort your shiet out ;P

CharlieSpencer
CharlieSpencer

which I've been using instead of a wallet for almost two decades, has financial cards, driver's license and military ID, an ephedrine injectory, key ring, cash, and a couple of USB flash drives. None of those incur a monthly service charge. You'll notice the lack of a phone, which I only tote when traveling.

beaverusiv
beaverusiv

EFTPOS card, driver's licence and a sushi place stamp card. Lucky in NZ we don't need cash or credit cards. I wouldn't be able to sleep if I carried either. Using an EFTPOS phone instead of a card doesn't really bring much benefits I can see, unless it provides more information ( like banking details sans mobile data ).

HypnoToad72
HypnoToad72

And unjailbroken phones' data being stolen within x period of time (PWN2OWN being an interesting resource to read...) "Robust" is just another empty shell buzzword that corporations love to read. It makes them feel good, nut each of your three points can be disproven. When it comes to the rush for profit, they all get sidestepped and the veneer or "robust" put in its place. And have the credit card/bank companies cleaned up their act? Heh.

DT2
DT2

And with a five-inch screen. ;-)

DT2
DT2

"... embedding identity chips in our bodies..." What a wonderful idea. I'll get right on that...

JP-470
JP-470

Bad enough that I may be mugged for my wallet (which I do not carry), but I may have to worry about somebody extracting my chip... keep the chips out.

Joe_Wulf
Joe_Wulf

Without rock-solid, provable methods for uniquely and infallibly identifying THE individual, then the rest is an exercise in avoidance.

CharlieSpencer
CharlieSpencer

my debit card has pretty much replaced cash for me. It sure makes it easier to decline when someone comes around collecting money for another employee's birthday gift or baby shower.

DT2
DT2

A 2.5% or 3% merchant charge is typical for any credit card purchase.

Jordon
Jordon

The vendor pays, just like using a credit/debit card. Of course, ultimately the customer pays, but the cash price and credit/debit card price are suppose to be the same. Even though some vendors don't abide by it, that's what's in the "merchant's terms of service" for Mastercard and Visa.

CharlieSpencer
CharlieSpencer

I was just noting that the device ain't free. Many people are unaware of the transaction fee. Me, I enjoy the convenience, but couldn't the muthas charge a flat rate per transaction instead of a percentage? Geez, the banks are already saving a ton of money with cards vs. what it used to cost to process paper checks, not to mention all the tellers they've been able to let go (and benefits they don't have to provide).

CharlieSpencer
CharlieSpencer

where the cash vs. card price is different, and on a regular basis: gasoline. Many stations are returning to a cash discount. I've seen them between 3 and 5 cents. i wouldn't be surprised to see a cash discount from those small vendors using a card reader for their phones. The model I've seen advertised says it charges 2.5 or 3 percent. Banks closed? Make a small purchase at the grocery and exercise the option to get additonal cash. A couple of soft drinks are usually less than an ATM fee. Like you, I recently abandoned B of A. Incidentally, the bank I switched to (USAA) refunds other banks' ATM fees.

Jordon
Jordon

If the cash price and the "plastic" price is the same, what's the difference? Whenever I need to replenish the cash in my wallet, I spend my time (and fuel) to go find it. Banks closed? Find an ATM? Does the ATM come with a fee? I think the last time I actually visited a bank was when I moved everything out of Bank of America and into a credit union a few years ago.