Many of us now use our phone to check our email more often than we use our computer. Our phones go everywhere with us (although please hang up when you’re in the can as few things are more disgusting than listening to someone talk to their mom when they’re droppin’ the kids off at the pool in the stall next to you or hearing someone you’re talking to dropping’ a deuce in the pooper on the other end of the line). Many no longer have land lines and some have even dumped desktop and laptop computers in favor of smart-phone or tablet based digital lives. Few skipped the computer altogether as pundits thought, but then the globe hasn’t fully been digitally meshed.
Technology has connected us to a wireless world. But it’s also changed how many of us view and use money. Many of us forgot what cash looked like a long time ago. We live on plastic. We use mint.com, Quicken or some other online aggregator to access our financial lives much as we manage our servers: using a single pane of glass. With our transactions securely accessible in the cloud and our bills on auto-pay we are able to realize how great, or how bleak, our financial picture is, both short-term and long-term.
Maybe we grab cash to pay for parking (less and less) or maybe we hit the ATM on the way to buy something we found on sites like craigslist (the final frontier of the cash and carry economy). But increasingly, people in developed economies are moving away from cash. In this scenario, banks charge merchants percentages of the transactions taken. Visa, Mastercard, Barclays, American Express, Discover, etc.
According to the latest numbers from the Department of Commerce, $300 billion in consumer transactions occurred on the internet in 2008. Not a lot compared to $3.7 trillion total going over the internet (the other $3.4 trillion were business to business transactions). But a lot considering that telco companies in the US combine to rake in about the same at $300 billion.
The US economy is worth around $22 trillion a year, meaning that there’s still a little more than 83% of the economy that we computer nerds would just love a piece of. We have our phones with us, and like a Widespread Panic song we’re more and more fond of Travelin’ Light (MacBook Air, smaller iPad, etc). So it makes sense that our phone would be able to act as a credit card. And if that happened then there would be a cut for someone. Banks want that cut, but then, so do the wireless companies. And of course, the makers of cell phones wouldn’t mind a taste too while we’re at it. I can understand why they’re arguing over a piece of the action as it will result in more fees than the entire amount of money spent on products online.
It seems as though momentum is picking up for Near-Field Communications (NFC), which allows for phones acting as wireless credit cards. NFC runs on the 13.56 MHz frequency and allows vendors, such as Starbucks, who have support for NFC to swipe your card without it ever leaving your hand (by the way, companies like IBM won’t mind selling their clients all new cash registers). Google is pretty hip to NFC, with the Samsung Nexus S, with Nokia and RIM on their way with products. And NFC is accepted about 200,000 locations in the US already. Oh, and most banks are testing it out now (but then they’re probably testing a lot of other stuff too)…
The Payment Card Industry Security Standards Council sets rules for both (e.g. PCI compliance). Up until earlier this year, they had approved a few applications that allowed people to make mobile payments using phones. These included VeriFone for iPhone. But with VeriFone leaving the table there is nothing else for the iPhone. Therefore, many project that the future of the iPhone will include NFC.
I don’t like to prognosticate, but something is going to happen with this whole use-your-phone-as-a-credit-card thing. If Apple jumps on board with NFC (both AT&T and Verizon are on board with Discover under the ISIS banner so wouldn’t be a surprise) then NFC will truly be the next big thing. If all (and I mean all) of the other wireless carriers do this without the iPhone they’ll leave Apple behind and Apple will have to play a little catch-up. Or Apple will bring out something cooler than NFC as “one more thing”. Or of course it could all be a crock of crap and no one will actually care about replacing their credit card with a phone. I remember when RFID was supposedly going to replace credit cards according to pundits. That hasn’t really happened, so maybe this won’t either.
PS – Don’t forget to charge your phone before you head out to dinner or you might spend the evening washing the dishes!