A Cashless Society is Right Around the Corner; the Endgame is the Microchip Implant

At First Data, we’re working hard to help make Near-Field Communications (NFC)-enabled mobile commerce a reality. Many companies across the payments industry share the vision of an NFC future for commerce, and activity in this space seems to be accelerating. Why are we so excited about NFC? Because an NFC platform on a mobile handset opens up a whole new world of possibilities. Combining the power of the mobile network and the mobile handset with the ability to exchange information at short range in the physical world creates endless possibilities. What could you do with your mobile phone? Think about touching your phone to a point-of-sale terminal to buy a cup of coffee with your debit card. Touch your mobile phone to your babysitter’s mobile phone to pay her, instead of fumbling for cash. You could use your mobile phone at the front desk of a hotel at check-in to download your room key and then touch your phone to the hotel room door to unlock it. Or imagine touching your mobile phone to a reader at your doctor’s office to have the information from your latest visit downloaded to the medical file on your phone. - Perspective: Accelerating Mobile Commerce with Trusted Service Management, First Data, October 13, 2009

Now Make Payments Via Mobile Phones

By ANI
January 3, 2010

Oxford University researchers have developed a new technology that enables safe payments to be made through mobile phones.

The technology, designed by professor Bill Roscoe of the Computing Laboratory and colleagues, will now be launched into the market by Isis Innovation, the university's technology transfer company. Roscoe said:

"A key requirement of new payment systems will be the ability to make payments from person to person, such as paying a builder or a friend."

"What we have is technology which enables anyone to easily create a secure connection between two devices: it can work via Bluetooth, WiFi, the internet or across ordinary telephone or SMS connections.

"The core of our technology is a new security protocol that enables strong cryptographic keys to be created with the least possible work. The key to the protocol is that it prevents anyone from doing any searching to break into the transaction."

A user of the technology checks if a 4-8 digit numeric code generated within their own phone matches with the one generated by the payee. This number is random and there is no need to maintain secrecy.

This guarantees that the customer's mobile is connected to the correct store, or to the cell phone of the person they have to pay. Thereafter, the payment takes place without exchanging sensitive details like credit card numbers or PIN.

No hardware is expected to be needed for the use of the technology. The Oxford team says the payment can be made in numerous ways—by using electronic cash or credit stored on a mobile phone, via authorisation of a credit card payment, or by asking a bank to pay a person a specified sum of money. Roscoe said:

"The technology is designed to put the payer in charge of the connection and let him or her have direct control over how much is paid and to whom—very much like a cheque.

"It is clear that banks will be looking for innovative solutions to avoid the limitations of current technology and that the ability to pay using mobile phones in the same way that you do now using a cheque will need to be phased in over the next eight years. The beauty of this system is that it can be used for many different methods of payment."

Mobile Payment: The Linchpin of the Mobile Commerce Economy

First Data provides insight into Mobile Payment being the payment option of the future.

By Barry McCarthy, First Data
October 8, 2008

Mobile payments will likely emerge as the way to pay, ultimately eliminating your dependence on credit and debit cards, check—and even cash.

Mobile devices are on the forefront of revolutionizing how consumers monitor finances, make purchasing decisions and pay for transactions. Planning for this change will help position all of us for success in mobile commerce.

Commerce is making payment and receiving payment. If there is no payment, there is no commerce.

This statement is every bit as true for mobile commerce as it is for traditional commercial activity. But how does payment actually work in a mobile commerce economy?

Let’s take a look, and pretend you are a commuter taking the Bay Area Rapid Transit (BART) to work everyday.

On a typical day you race out of the house and head to your transit station, wave your phone at the turnstile’s electronic reader, dash down to the platform and just make your train. Perhaps you read the morning paper as you pass under San Francisco Bay.

The train pulls into your stop, and as you step off, you notice a panel advertisement for a Jack-in-the-Box® mango smoothie. The ad has a logo signifying it’s a smart ad—an advertisement that transfers information to your phone when you tap it on the logo.

You tap the smart ad and your phone displays the nearest Jack-in-the-Box location: there’s one on San Francisco’s Mission Street, right by your station. You leave the station, step around the corner and order that smoothie. You pay for it by tapping your phone at the checkout stand. You remember that, because of your enrollment in a loyalty program, you also downloaded a 10 percent discount coupon when you tapped the smart ad. That amount was automatically deducted from the price of the smoothie.

What does this simple transaction mean to you as a merchant or financial entity? What will it cost you? How does it affect the shopping experience and your ability to build customer relationships? And what does it mean to traditional credit and debit card payments?

To answer these questions and understand how central mobile payment is to the entire mobile commerce ecosystem, let’s take a closer look at what’s behind a simple mobile purchase. Later in this paper, I’ll talk more about the technology that made this transaction happen, but for now, take a look at the transaction itself, because this is at the heart of commerce—exchanging value for value and receiving payment from the customer.

In this case, the merchant produces the mango smoothie, and you enter a code into your phone, wave the phone near a reader, receive a 10 percent discount, see a display of the transaction details and then are on your way.

What was special about this transaction?

First, it was fast. The merchant did not need to ask if you had a coupon or a discount card or some other customer-loyalty incentive. Nor did you need to dig around for a coupon or punch card. If you had signed up for these incentives, they would already be in the mobile device and automatically calculated during the transaction.

Also, the merchant did not need to receive cash or make change, nor did the merchant need to handle a debit or credit card. Just as significantly, you as the customer did not have to deal with cash or cards. It was a faster and simpler transaction for both the merchant and you.

Pilot programs in Europe have shown that mobile purchases cut the average transaction time in half. A study recently conducted by First Data demonstrates this as well. The study, carried out in several corporate cafeterias around the country, measured factors related to the use of prepaid contactless stickers. A contactless sticker is like a miniature adhesive gift card with a Near Field Communication (NFC) chip inside. The study showed that contactless payments are typically two to three times faster than cash or no-signature card payments and about five times faster than card payments requiring a signature.

The second big difference between this mobile transaction and a more traditional payment is that there was no leather wallet full of cash and credit cards involved. You left your traditional wallet at home.

Third, just before swiping your phone near the reader, you entered a short personal security code that enabled the transaction. The phone’s purchasing capability automatically locked as soon as the transaction was complete. This means that if you lost your phone, nobody would be able to use that mobile device to make unauthorized purchases. This provides a higher level of security compared to credit cards or other payment methods that typically reside in the leather wallet.

On the merchant side of the transaction, the point of sale is equipped with an NFC chip reader. As I will explain later, your phone is equipped with an NFC chip. When the phone passes close to the reader, the reader is able to pull essential personal identification and account information from the phone, similar to the data contained on the magnetic strip of a credit or debit card. The NFC terminal reads this information in much the same way a credit card swipe is read (although no physical contact is needed to read the NFC chip) and the account information is transmitted to the transaction processing entity (First Data, for instance). The payment transaction is then processed in the conventional way.

One other critical action took place during this transaction. Before you passed your phone over the reader, you made an important choice. Because mobile devices will be provisioned with several payment accounts, you can choose which account to debit the cost of the smoothie against. You may select a credit or debit card account, or (and this is of great significance to the merchant) a merchant-specific prepaid stored value account—something like a refillable gift card. Commerce-enabled mobile devices today can manage multiple accounts.

This capability puts merchant-sponsored prepayment incentive programs on exactly the same footing as major credit and debit cards—or cash—from the customer’s usability perspective. And that opens a whole new world of opportunity for merchants to build customer loyalty and possibly even lower their transaction costs.

This transaction has implications for the entire mobile commerce value chain, which includes merchants, point-of-sale equipment manufacturers, financial entities and transaction processors, mobile phone manufacturers and mobile carriers who provide the network.

Many people do not realize that most of the infrastructure needed to support this mango smoothie transaction is in place today—all around the world. In fact, the mobile payment scenario discussed above actually took place in San Francisco in early 2008 as part of a First Data pilot program.

Mobile Payment White Paper: Download PDF – 810 KB

Wallet of the Future? Your Mobile Phone

By John D. Sutter, CNN
August 17, 2009

These days, it seems that most Americans carry three things in their pockets or purses at all times: keys, a wallet and a phone.

But, in the not-too-distant future, you may be able to leave the wallet and the keys behind.

The mobile phone is staging a coup.

Some analysts say that within five years, mobile phones in the United States will be able to make electronic payments, open doors, access subways, clip coupons and possibly act as another form of identification.

These futuristic uses for phones are becoming reality in countries like South Korea and Japan, which typically are ahead of the United States when it comes to mobile technology.

A 963-person survey by Forrester Research, for instance, found that 15 percent of Japanese mobile phone users make payments and purchase products in stores with their phones.

The ideas have been tried in the United States too, but with less success.

In the late 1990s and early 2000s, banks and cell phone makers started conducting trials with U.S. customers. Limited groups of people were given the ability to scan their phones to make payments, enter stadiums and access public transit.

Those phone-forward guinea pigs didn’t like the new functionalities as well as expected, and the ideas never took off on a commercial scale, said Ed Kountz, a senior analyst at Forrester.

But Kountz said there’s now resurgent interest in merging phones with wallets and keys. In 2009, people are more dependent on their phones than they used to be.

“I think it is different this time around,” said Kountz, who believes that phones in the United States will be used to make mobile payments within five years.

“The overall utility of cell phones has expanded, and more consumers are using the data aspects of cell phones,” he said.

Phones everywhere

At the end of 2008, there were an estimated 4 billion mobile phone subscriptions worldwide, according to the International Telecommunication Union, a United Nations agency. That’s about two cell phone subscriptions for every three people.

The fact that phones are everywhere and are commonly used to access the Internet and compute means they’re well poised to overtake wallets, said Justin Denison, vice president of strategy for Samsung Telecommunications in the United States.

Gartner Inc., a technology research company, issued a report in May saying mobile payments will increase 70 percent in 2009, to 73 million people worldwide.

By 2012, the company says, 190 million people will make mobile payments.

Still, that adoption rate is relatively low. Only 3 percent of people in North America are expected to conduct mobile payments in 2012, Gartner says.

Potential problems

There are no guarantees that the technology will catch on in the United States as it has in Asia, Denison said.

“We can make investments. We can test things. But it’s not always the case that [new technologies] get adopted here,” he said.

And technology that turns phones into credit cards and IDs poses several potential problems.

If phones replace wallets, would-be thieves will see every person walking down the street talking on his or her phone as a target for robbery, said Lillie Coney, associate director of the Electronic Privacy Information Center.

“It would be the ultimate form of identify theft, that’s for sure,” she said.

Banks and mobile phone makers say the technology is safe. But it’s not clear whether consumers will demand the change.

There’s also no firm plan about who would pay for the technology to be added to phones and put into stores, said Simon Pugh, vice chairman of the NFC Forum, which supports the technology, and head of mobile payments at MasterCard.

“With any new technology, there’s an ecosystem that needs to develop to make it viable,” he said. “One of the key things that’s needed is new hardware. You need a special chip in the phone, and you need another radio frequency antenna to communicate … and that costs money.”

Swipe a phone

Squeezing the contents of a person’s purse into a phone relies mostly on a technology called near-field communication, which allows any enabled device to communicate with a cash register or subway turnstile through a secure radio frequency.

The technology is similar to the scanners and passes that allow commuters to pay for drives on a turnpike without stopping at a toll booth.

When a phone is enabled with near-field communication technology, shoppers can load bank and credit card information onto their phones and then scan them to buy goods at the grocery store, gas station, subway or any other place set up to read the device.

Doug Brown, head of mobile product development at Bank of America, said the idea is popular with consumers because it simplifies their lives.

“You don’t need cash anymore. You don’t need your wallet. That’s really the endgame here, is that we can replace the physical wallet and all of the cash needs and the plastic that you’re using today,” he said.

Similarly, phones could include scannable identification information.

Eye scans and fingerprints would make phone IDs and payments more secure, Brown said. The ID technology might work like a corporate security badge, which pulls up personal information when scanned.

Some hotels have played with the idea of using near-field communication technology to enable a guest’s phone to act as a room key. According to the NFC Forum, a New Zealand hotel last month installed locks that are opened with mobile phones.

Texting and barcodes

People can make transactions with their phones through lower-tech means, too.

Mobile banking apps use the Internet to allow people to transfer money and purchase goods online. And in some parts of the world, text messages sent by mobile phone are used as a form of currency.

In Kenya, for example, more than 6 million people are registered with M-Pesa, a service that lets people send text messages to make payments and transfer money from phone to phone.

Some of those users have access to banking for the first time because of their phones, said Susan Teltscher, head of market information and statistics at the International Telecommunication Union.

iPhone users in the U.S. and elsewhere already can upload plane tickets onto their phones and then scan a digital version of the ticket’s barcode instead of presenting paper tickets.

There’s hope that, eventually, bank customers here may have individual barcodes they can use to purchase goods in stores.

Kountz, the analyst at Forrester, said the economic recession may hold many of these ideas back. And consumer interest in mobile payments remains low: less than 10 percent, he said.

Still, many companies and consumers want to ditch plastic cards, unwieldy cash and hefty wallets.

To them, it’s just a matter of how and when — and who will pay.

What's the Future for Your Mobile Phone?

From Google to Microsoft and Sony Ericsson to Apple, new devices, products and services unveiled at Mobile World Congress this week hint at the sort of handsets we'll be using in the months to come.

By Claudine Beaumont, Telegraph
February 18, 2010

The message from this week's telecoms show could not have been clearer: mobile is the future. As established players, such as Samsung and Nokia, rushed to play catch up with the likes of Apple, technology companies, including Google and Microsoft, laid down clear markers to their rivals.

Eric Schmidt, Google's chairman and chief executive, used his keynote address at Mobile World Congress to underline his company's commitment to mobile in all its forms. Google was, he said, now a "mobile first" business, with programmers and developers building mobile versions of applications and software before they built the desktop versions.

He said that more than 60,000 devices running Google's Android mobile operating system were being shipped every day, and that smartphone sales would overtake PC sales in the the next few years.

Indeed the phone, said Schmidt, is no longer just a device:

"It's your alter ego — it's fundamental to everything you do."

That was a view echoed across the show floor in Barcelona, where phone makers unveiled their latest handsets designed to "inspire" and "delight" users, and become the anchor point for their work and social lives. Developers showed off their latest software and apps, designed to simplify communication and make the mobile phone the ultimate do-anything gadget ...

Want to Launch Mobile Payments? Buy a Bank

By Steven Carlson, CITT Project
December 19, 2008

Several years ago, a former business partner and I were speculating about how the mobile operator industry would evolve. The mobile phone business was booming, but it was already clear that growth had limits. What to do once every citizen had a handset?

The solution seemed obvious even then. As mobile services evolved, the phone would eventually be used as a payment mechanism. By controlling the payment interface, operators stood to make a fortune from transaction fees. Could mobile operators eventual evolve into financial institutions or even banks?

Something like this has happened in Austria, as I learned at a recent conference, IIR’s Mobile and NSF Payment Strategies, held here in Budapest.

It’s easy to imagine a world where your mobile handset works just like a virtual wallet. The trouble is getting others to play along. Launching a mobile payment scheme means navigating the competing interests of mobile operators, financial institutions and merchants. It also means building a critical mass of services and customers.

Three years ago I posted to nowEurope about SEMOPS, an FP6 funded project that brought together a consortium of (mostly) Hungarian banks, technology providers and mobile operators. SEMOPS developed a mobile payment technology and conducted tests with a major local book retailer.

Unfortunately, the SEMOPS scheme never took off. None of the consortium members stepped up to champion the project and drive it toward commercial success. Quite possibly this is because none of the members could claim solitary ownership of the project, as the technology was jointly owned by the consortium.

In Austria, exactly the opposite thing happened. The country’s largest mobile operator committed to building its mobile payment structure, first by purchasing a technology provider (Paybox, 2001) and then by founding a fully owned bank (A1 Bank, 2002).

At the Mobile and NSF Payment conference, A1 Bank COO Thomas Capka described how Mobilkom and A1 had progressively rolled out new tiers of service, including mobile parking payments, municipal transport tickets, Internet payments and vending machines.

Capka related that in Austria cigarettes can only be purchased from vending machines using A1’s mobile payment scheme, which simultaneously verifies that the purchaser is 18 years of age or older.

As Mobilkom and A1 developed critical mass around their mobile payments technology they were then able to negotiate interoperability agreements with competing mobile operators. At the time of this writing, all major Austrian operators are onboard, with the solitary exception of Hutchison.

In all, four million Austrian consumers are now equipped to use the mobile payments scheme. By comparison, just 2m Austrians have credit cards.

Capka stated that his company hopes to develop a national standard that can then be applied to international payments. It will be interesting to see how this develops. Mobilkom has subsidiary companies in several Central European markets, where they might decide to roll out their payment technology.

A further issue is how to integrate bank cards into the payment model. At present, a customer’s mobile phone payments appear on the same statement as his phone charges. In future, A1 and Mobilkom’s payment scheme may evolve into a service bundled with a bank card. Already the distinction between mobile operator and financial institution is becoming blurry.

Paper, Plastic ... or Phone?

Terri Bradford, Payments System Research Specialist at the Federal Reserve Bank of Kansas City, has written a briefing paper titled "Paper, Plastic......or Phone?" that examines mobile-phone payment and banking alternatives in the United States. The paper explores prospects for growth, available technologies, and the outlook for one or more technologies coming to dominate the market.

By Terri Bradford, Federal Reserve Bank of Kansas City
Originally Published on December 2006

In the December 2005 issue of the Briefing, it was noted that contactless technology could reside in several devices, including traditional payment cards, key fobs, watches, and even mobile phones. One year later, discussion in the United States about the use of mobile phones as a payment device and as a means to facilitate online banking has intensified. Such mobile functionality already has been adopted in other parts of the world, and adoption in the United States may not be far off. Soon, instead of choosing between paper and plastic when making a payment, the phone may be an option as well.

Prospects for growth

A number of forces are at work suggesting that mobile-phone payments may be poised for growth. The growing number of mobile devices, increased consumer willingness to adopt new payment methods, the surge in the use of payment cards, and a wide-ranging choice of service providers all point to mobile phone payments becoming a reality in the not-too-distant future.

According to a June 2006 survey conducted by CTIA, The Wireless Association, there are more than 219 million wireless subscribers in the United States. That means that more than 72 percent of the total U.S. population owns some type of wireless device, including mobile phones, Blackberries, and PDAs. And, when it comes to mobile phones, for many users—because of the variety of features and functionalities—phones today are being used for much more than simply making and receiving calls. They have become full-service electronic devices providing access to the Internet, music, videos, games, text messaging, graphics, and more. So, it is entirely conceivable that consumers may be ready to adopt mobile phones as a means to access payment and financial information as well.

Mobile technology can be thought of as the latest offering in a line of emerging payments. Though it has taken some time, consumers have become more familiar and comfortable with making payments in new ways. A December 2005 poll taken by the Pew Internet and American Life Project, for example, found that 43 percent of U.S. Internet users, or about 63 million American adults, bank online. PayPal reports that it now has over 100 million accounts, which consumers use to make person-to-person (P2P) payments online as well as for other transactions.

And, contactless payments also are on the rise. Where consumers have been exposed to contactless payment methods, such as Speedpass at Exxon-Mobil gas stations and PayPass and blink at CVS pharmacies, they reportedly have liked them and would use them more often if they were more widely available. Mobile phone technologies provide another platform to enable all of these types of activities.

Consumers also are increasingly using credit, and especially debit, cards for low-dollar transactions, which may further encourage mobile phone payments. Networks are offering differential pricing and creating new merchant class categories to encourage low-dollar merchants to accept cards. In turn, consumers are increasingly using plastic to make payments everywhere from the grocery store to the convenience store to the fast-food drive-thru. Speed and convenience are important in such transactions for both merchants and consumers. Mobile payment technology could make such transactions even quicker.

Finally, a host of service providers have taken initial steps into the mobile-phone payment industry, suggesting a level of interest and ensuing competition that could help spur activity in this market. A number of banks, nonbank payments providers, and telecommunications companies are offering, piloting, or seriously discussing mobile payment and banking services.

Available technologies

Several technologies are available for mobile-phone payment and banking. These include near field communication (NFC), short message service (SMS), and wireless application protocol (WAP) technologies. In addition, payments-related applications can be downloaded to reside directly on the mobile device.

NFC is a short-range wireless connectivity technology that evolved from a combination of existing contactless identification and interconnection technologies. SMS technology, which exists on most of the mobile phones available on the market today, allows users to receive and send short text messages (from 150 to 160 characters) to other mobile phones. WAP technology is an open, international standard for applications that use wireless communication and is primarily used to enable Web access from mobile devices. And, application downloads use a mobile device’s WAP capabilities to allow the user to type the Web address of the site from which they want to obtain an application, download the application, and essentially “register” their device for use by entering the phone number and creating a PIN.

JPMorgan Chase, the deployer of the blink contactless card, launched a mobile payments trial in December 2005 using NFC technology. In that trial, a small number of Atlanta Thrashers and Hawks season ticket holders, who also had Chase-issued Visa credit card accounts and Cingular wireless accounts, were provided the ability to make mobile payments at special contactless readers installed at concession stands throughout the arena. Results were evaluated and focus groups were conducted after the trial. Speedier transaction times and greater convenience were among the observations made by trial participants. In addition, participants indicated that they would like to use their mobile devices for payment at other merchant locations, for all purchase sizes, in the future.

Earlier this year, PayPal, the online P2P payment service owned by eBay, began offering an SMS-enabled payment product called PayPal Mobile. PayPal Mobile allows users to make payments or send money from their PayPal account by registering their phone at the PayPal Web site and creating a mobile PIN. Once done, users either can text message the payment information directly to the recipient or call a PayPal automated system. PayPal then notifies the recipient of the payment and tells them how it can be claimed. In addition, PayPal Mobile offers a “text to buy” feature: anytime a PayPal mobile user sees the PayPal “text to buy” icon on a poster, online, in a magazine, or at an event, they can text the item code to the number shown. PayPal then calls the user back and requests a PIN to confirm the order. Once done, the item is shipped to the consumer.

Launched in 2005, Obopay is another early-entrant mobile payment provider. Its mobile service utilizes a prepaid MasterCard account, an assigned PIN, and either SMS technology, WAP technology, or an application download to conduct mobile payments. Obopay users establish their account online. Those choosing the application download option must also identify their mobile telecommunications provider. Application download instructions specific to that provider then will be furnished. Using any of the three options Obopay customers can send money, request money, conduct balance inquiries, and review payment history from their mobile phones. Customers also can use the prepaid MasterCard card at ATMs and merchant checkouts.

A fourth mobile-phone payment example is Firethorn LLC. Firethorn provides services to banks that facilitate them in offering mobile-phone payment and banking services to customers. Taking the approach of establishing strategic alliances, last month, Firethorn announced two such relationships, one with CheckFree and the other with Cingular Wireless. These relationships tap into each provider’s strengths in their respective industries: CheckFree’s established relationship with banks in providing an electronic billing and payments infrastructure and Cingular’s position as one of the largest wireless providers in the United States. To date, two banks have signed on to offer Firethorn services: Bancorp South of Tupelo, Miss., has begun offering Firethorn-enabled services to its customers and it was announced that Synovus of Columbus, Ga., anticipates doing the same by the end of second quarter 2007.

Market dynamics

An interesting question to ask is the extent to which future deployment of mobile payment and banking products will mirror the deployment of online banking and P2P payment products. With online banking, the experience was that nonbanks were at first more prominent, but banks are now major providers of the service as well. In the case of P2P payments, however, banks have not fared as well. Nonbanks dominate that space.

Banks currently play a prominent role among participants providing NFC-enabled mobile payments. Moreover, the actual payment transaction is typically recognized as being handled by a bank. With the SMS- and WAP-enabled models and downloaded applications, on the other hand, nonbank providers appear to be at the fore. The strategic alliance model adopted by Firethorn appears to strike a balance between the two. Which approach will “take hold” in the marketplace could hinge on a number of considerations. Among them: which technologies and firms consumers feel most comfortable with; which options offer the most convenience; which option provides the best perceived security; and how widely accepted the payment methods become.

At present, consumers already are to some extent familiar with NFC-enabled, and SMS- and WAP- enabled, technologies. NFC payment via a tap or a wave of a card is becoming more familiar. And, for those already using that form of payment, a mobile phone as the payment device may not be much of a stretch. Likewise, SMS instant messaging and WAP-based Internet browsing are commonplace for some users of mobile devices, and the use of a PIN is a familiar process for many whether at the ATM or point of sale. So, mobile payment via SMS or WAP may not be much of a stretch either. Downloading applications to a phone, however, is a less familiar process.

Convenience considerations largely depend on the situation. If there were a need to make a payment in a physical environment, for example on the subway or at the point of sale, NFC likely would be the preferred method. If the need were to arise in a virtual environment or across distances, on the other hand, SMS, WAP, or an application-based payment would likely be preferred. However, if the desire were to obtain financial information or to conduct banking transactions, a downloaded application or WAP would be required.

Security considerations raise other issues. With mobile technology in general, it is known that some data, such as phone numbers and text messages, can be stored on the actual device even when the data have been deleted from the subscriber identity module (SIM) card within the device. Might this be an issue for payment and financial data as well?

A security consideration associated with NFC technology is whether the information being transmitted can be captured by something other than the intended contactless reader. In addition, if a phone is lost or stolen, since there is no PIN required, there is the possibility that some unauthorized transactions could be made before the payment component could be deactivated. SMS technology employs the use of an assigned PIN and confirmations.

The use of a PIN, while not full proof, provides some protection against unauthorized use, and may therefore be more appealing to some users. The use of WAP has considerations, such as encryption of information and spoofing, similar to WiFi and Internet use in general. Ultimately, application download may offer the most protection. In addition to utilizing PIN protection, the information that resides on a phone is encrypted and is said to be comparable in amount to the information provided on an ATM receipt. Further, should the phone be lost or stolen, it could be remotely wiped clean of any financial information.

Finally, as it relates to payment acceptance, NFC-based mobile payments may experience growth related to payment terminals already deployed for use with contactless payment cards. However, it remains unclear how transactions beyond purchases might be facilitated with NFC. SMS-based mobile payments, in contrast, may require a kind of “viral” adoption to succeed, as sender and recipient devices will have to be able to “talk” to one another. WAP provides an additional screen from which to access the Web and there already is growing acceptance of transacting online. Application download will have to gain acceptance not only from consumers, but also telecommunication companies and banks.

Conclusion

Mobile payments may be positioned for a meaningful level of adoption in the United States. While there are yet challenges to overcome, a significant portion of the population owns a mobile device, acceptance of previous emerging payment methods continues to increase, and there are a number of interested parties and available technologies that address a variety of mobile payment needs. As with other emerging payment methods, it will be interesting to see how the mobile payment and banking market evolves.

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