Mobile Phone Payments: The New Plastic Money

A Nokia study found that there were three things that people took with them when they traveled: keys, money, and a mobile phone.  Based on the dizzying array of announcements in 2010 and 2011, there seems to be a movement to bring that list to just keys and a mobile phone.

In January of 2011, Starbucks announced its Card Mobile App which allows customers to pay for their beverages at over 6,000 U.S. stores with a BlackBerry, iPhone, or iPod Touch instead of the traditional monetary paper or plastic.  The application uses a quick response (QR) code like the ones used on the plastic Starbucks card.

But the majority of buzz around so-called contactless payment is a technology called near field communications (NFC).  It is a subset of radio frequency identification (RFID) whose range is limited to about 10 centimeters (about 4 inches for us Americans), operates in the 13.56 MHz frequency band, and has transfer rates up to 424 kilobits per second.

While countries like Japan and Korea have have been using mobile phones for payments since the mid 2000’s, the rest of the world is now starting to take interest.

There are a number of activities and announcements in the smartphone arena.  Some notable ones include:

  • Nokia announced that all new Nokia phones would come with NFC starting in 2011.  A short time later, Nokia clarified that it would be in some models.  Now that the Nokia-Microsoft (or Microsoft-Nokia, depending on your perspective) “broad strategic partnership” has been announced,  it is assumed that the commitment will continue, although nothing official has come out (yet).
  • Google included an NFC chip when it released the Nexus S, the successor to the Nexus One,  in December of 2010.  It also included Gingerbread, the code name for Android 2.3, which has APIs for NFC, paving the way for more Android-based devices.  Google also launched Google Places window stickers which were equipped with NFC chips that allowed the Nexus S to download information about the particular business.
  • Samsung announced that its bada-based Wave 578 smartphone will include an NFC chip.
  • RIM confirmed at Mobile World Congress 2011 that BlackBerry smartphones with NFC capability will be released later in the year.  They are also working with Bank of America on an invitation-only Mobile Wallet trial.
  • For Apple products,  rumours abound that NFC capabilities will be included in both the iPad 2 (which didn’t have it) and the iPhone 5 (which is being disputed by another part of the rumor mill).
  • LG is not only looking at adding NFC to their smartphones but also working in providing infrastructure for contactless payments in Europe beginning in 2012.
  • HTC’s CEO announced that it will be adding NFC to its LTE devices in 2011.

A useful site which has “a definitive list of NFC phones” can be found at

The mobile operators are also interested in getting into the NFC game.  Some examples include:

  • In November 2010, AT&T Wireless, T-Mobile, and Verizon announced ISIS, a joint venture for a mobile phone payment network..
  • A number of leading mobile operators announced commitment to launching NFC services by 2012 (
  • Deutsche Telekom (German parent of T-Mobile USA)  announced at Mobile World Congress that it will have full deployments of NFC capabilities in 2012.
  • Airtel Africa has plans to launch NFC service in fifteen African countries in 2011.

The credit card/payment systems provides aren’t resting on their laurels.  Big guns such as Visa and Mastercard as well as smaller e-commerce companies like PayPal, Obopay, Square, and Zoompass all have NFC initiatives.

While NFC-equipped mobile devices and payment networks are gaining momentum, there are other parts of the infrastructure such as payment readers that will need to be deployed at merchants and other point-of-sale locations like vending machines and mass transit stations.  Also, It will probably take some time for consumers to have confidence that the NFC ecosystem is secure and reliable.

So now that your mobile phone will replace your need to carry money separately, that leaves  your keys and mobile phone.  Any wagers on which one will be next to go?

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