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Pay Via Smartphones

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PAY VIA SMARTPHONES Introduction
It has been sixty years since the creation of the plastic credit card. The mobile phone technology finally brought the biggest revolution in the world of digital payments by introducing contactless mobile phone payment system, which is all set to create new trend in the consumer’s world. We can now use smart phones as mobile wallet to make payments for goods and services bought from the market. Contactless Near Field Communication (NFC) Much of the mobile payments activity centers on a technology called Near Field Communication, or NFC. Near Field Communication (NFC) is used mostly in paying for purchases made in physical stores or transportation services. An NFC chip built into the phone (or added to it via a micro SD slot or a carrying case) communicates with a credit-card terminal over a distance of less than two inches. Most transactions don’t require authentication, but certain require authentication using PIN, before transaction is completed. The payment could be deducted from pre-paid account or charged to mobile or bank account directly. Implementation of NFC in Asia and Europe NFC vendors in Japan are closely related to mass-transit networks, like the Mobile Suica used on the JR East rail network. Osaifu-Keitai system, used for Mobile Suica and many others including Edy and nanaco, has become the de-facto standard method for mobile payments in Japan. Its core technology, Mobile FeliCa IC, is partially owned by Sony, NTT DoCoMo and JR East. Mobile FeliCa utilize Sony's FeliCa technology, which itself is the de-facto standard for contactless smart cards in the country. Other NFC vendors mostly in Europe use NFC to pay for on- and off-street parking in specially demarcated areas. Mobile payment has been well adopted in many parts of Europe and Asia. Challenges in NFC Mobile payment method via NFC faces significant challenges for wide and fast adoption, due to lack of supporting infrastructure, complex ecosystem of stakeholders, and standards.
While phones may be safer than plastic, they come with their own security challenges: They are susceptible to malware (and certain British tabloid journalists) although some NFC chips are designed to self-destruct if they’re tampered with. Funnelling purchases through the phone will also allow Google and its rivals to greatly expand their data collection abilities, a chilling prospect for privacy advocates.
The Biggest Problem Confronting NFC Is Practical:
It may require new phones as well as new point-of-sale terminals, plus software that serves up targeted offers. Many economists call it ‘a multisided platform’ problem. Merchants don’t want to upgrade their terminals if there aren’t new payment-enabled phones, and consumers have no reason to buy NFC phones if there aren’t many places to use them. NFC: Future of Mobile Payment Various banks, wireless carriers, and phone makers have a lot of reasons to nudge the smartphone into the centre of the payment universe. Companies developing these services plan on packing loyalty cards, coupon folders, and Groupon-like deal-of-the-day offers right into the digital wallet. Retailers could build comprehensive profiles of their customers, targeting them with additional discounts and come-ons at the checkout terminal or when they’re out and about, in pretty much the same way Amazon and other online retailers track shoppers as they browse the Web.
Major Organizations Enter NFC Market
Nearly every phone manufacturer, including Nokia, Samsung, and Research In Motion (RIM), says it plans to pack its handsets with these NFC chipsets. The availability of smartphones with implanted NFC chips would push implementation forward. This could include the NFC in the iPhone 5, due for release in Q3. At present, Google’s Nexus S and the upcoming Nokia N9 are the only NFC-enabled smartphones in Australia. Samsung’s recently released Galaxy S2 has NFC chips embedded in some overseas handsets.
At the end of 2010, the wireless branches of Verizon, AT&T and T-Mobile launched a joint venture for a contactless mobile payment system called Isis. Also in May, Google announced a partnership with Citi and MasterCard; the trio, along with Sprint and payment processing company First Data, will begin road-testing a mobile payment app this year called Google Wallet, beginning in New York and San Francisco, are the culmination of a decade of arduous technology development and a multiparty, cross-industry battle over who will control the $20.5 trillion global market for in-store retail transactions. Also pushing their own digital wallets are, among others, Visa, American Express, EBay’s PayPal division, and Isis, a venture of three large U.S. mobile phone carriers.
The smartphone could become the central repository of not just bank account information but coupons, loyalty points, and membership cards, allowing companies such as Google to route deals to smartphones at just the right time and place. Smart cards with microchips, which you can tap at “contactless” credit-card terminals (no swipe needed) in some 300,000 locations around the world, have been widely embraced in Europe and Canada—and largely ignored by most U.S. consumers, who remain committed to a swipe and ensuing signature. PayPal, with 100 million active customer accounts, has caught on as a way for people to send money to each other and pay for items, primarily online. Companies such as Boku and Zong, recently acquired by EBay, have developed ways for shoppers to purchase items by charging them to their smartphone bill.
The most noteworthy venture to date comes from Starbucks, which converts existing prepaid account cards into a digital format: Customers enter their Starbucks card number into a mobile app, which produces an image of the bar code that’s on the back of their physical card. The cashier scans the phone barcode and the purchase amount is deducted from the account.
Long-term, many in the industry predict that near-field communication or NFC — the technology used by both Google and Isis — will emerge as the platform of choice. A senior analyst at ABI, which forecasts that the number of NFC-equipped phones worldwide, will skyrocket, from fewer than 6 million in 2010 to 172 million by 2013.
References
* http://en.wikipedia.org/wiki/Mobile_payment * http://moneyland.time.com/2011/06/10/mobile-payments-are-coming-%E2%80%94%C2%A0but-when/ * http://gadgetfeel.com/smartphone-pay-goods-services/ * http://www.businessweek.com/magazine/pay-as-you-go-with-smartphones-07142011.html * http://nfcdata.com/blog/2011/07/04/smartphone-pay-systems-on-hold-after-a-setback-in-a-recent-trial/
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