You know the scenario. Fumbling through your pockets at the supermarket
checkout, you realise you’ve left your wallet at home and all you have by
way of payment are a few coppers and an old bus ticket.
You’re about to make your red-faced excuses when you remember you also have
your mobile phone. All you need do is swipe it across a reader by the till
and instantly your purchases will be charged to your credit card.
Not satisfied with replacing your landline, MP3 player, camera and alarm
clock, mobile phone manufacturers have now set their sights on supplanting
your wallet. Their new generation of phones will link to your credit or
debit account as part of a joint initiative with phone operators, banks and
credit card companies. They predict this one-swipe payment technology will
potentially replace cards and cash and make it possible to go shopping armed
only with a mobile phone.
A “pay-by-mobile” system already operates in Japan, where it is nicknamed
“o-saifu keitai” (mobile wallet), and trials are under way in the United
States, France and Sweden.
Industry insiders predict the new technology could arrive in the UK within one
year. Pay-by-mobile received a boost last week, when the GSMA (Groupe
Speciale Mobile Association), representing mobile phone operators, announced
a framework for a global standard for mobile phone payments. This would
allow users of networks such as and Orange to use their phones to make
purchases in the sameVodafone, O2 way around the world.
“After several fragmented initiatives, we are now uniting around a single
approach to enable mobile phones to be used instead of cash or plastic,”
said Rob Conway, the GSMA’s chief executive.
The ability for mobile phones to be used as payment devices has long been seen
as the holy grail for both phone companies and banks. As tariffs for
conventional calls fall and competition from cheap or free calls over the
internet heats up, phone companies are increasingly looking to new
applications to boost revenue.
Credit card companies see pay-by-mobile as a way of encouraging people to make
small purchases that are currently made with cash, on credit. By volume,
two-thirds of UK payments are still made by cash, so “mobile wallet” would
give credit card companies a slice of these cash transactions. And research
shows people are more likely to leave their wallet at home than their mobile.
The technology that enables payment by mobile phone is called NFC (near field
communications). An NFC chip in the handset enables short-range wireless
radio communication between the phone and the reader (in a similar way to
Oyster travel cards in London), which triggers the payment. Bank or credit
card details can be stored in various ways, but the GSMA favours keeping
them on the phone’s sim card. The phone can simply be swiped across a
reader, or customers can type a pin code into the phone to authorise larger
payments. Some companies are also considering pay-as-you-go options, whereby
purchases could be deducted from a prepaid balance.
One of the principal backers of the new technology is MasterCard, which is
behind a mobile phone payment system called PayPass on test in the US and
France. MasterCard, which last week signed a deal with phone companies Nokia
and Samsung, says it is considering expanding its trials to the UK. The
credit card provider has already linked up with four of the top five US
banks to offer payments by mobile phone in 51,000 global shops and
restaurants.
“We’ve got all the different companies working together and we have proved it
works and is commercially viable,” says Tatiana Mulry, a new technology
specialist at MasterCard. “I used my phone to pay in a McDonald’s the other
day and everybody in the queue was fascinated. They love the convenience.”
Not everyone is convinced. Vincent Poulbere, a senior analyst at telecoms
consultancy Ovum, says it may be some time before the vision becomes
reality, not least because of the infrastructure needed. “Many companies –
banks, credit card companies, phone operators and makers, and retailers –
have to cooperate to make this happen. And customers will have security
concerns.”
The GSMA claims details can be stored securely on a sim card. And phone
companies remain confident that it’s only a matter of time before mobiles
add yet another function to their armoury. Nokia has just launched a new
handset with NFC capability – the 6131 NFC, which arrives in Britain in a
fortnight – and is testing a system in New York that enables customers to
swipe their phone across cinema posters to pay for movie tickets.
“The mobile phone has become like a modern Swiss Army knife, but without the
sharp edges,” says Gerhard Romen of Nokia. “It combines so many different
functions, and this is one more way to enhance convenience. Having credit
and debit card functions combined with your phone will be so much easier
than carrying a wallet full of cash and cards.”
Texted barcodes to give discounts at the till
It may be some time before you can buy your weekly shopping with a simple
swipe of your phone but a new system using barcodes sent by text message
will soon offer UK shoppers money off at the tills and pave the way for a
full pay-by-mobile system.
The scheme, called Shop Smart Save, has undergone trials in Hull and will be
rolled out in July across 17,000 stores nationwide, including some branches
of Somerfield, Coop, Budgens and Spar. To join the “discount club”,
customers send a text to the Shop Smart Save number to receive a personal
barcode. Special offers are then texted to their phone and, to take
advantage of them, all they have to do is present their barcode to the
cashier. Software installed in the cash register communicates over the
mobile phone network with the Shop Smart Save database, and discounts are
deducted as the shopping is scanned. Brands including Red Bull, Procter &
Gamble, Nestlé and Mars will offer deals. “Over time we hope to tailor the
offers to individual needs,” says Marc Lewis, founder of the Light Agency,
which is behind the scheme.
Chiltern Railways, which connects London Marylebone and the Midlands, is also
planning to text barcodes to passengers who buy tickets online. The barcode
would replace a ticket and could be scanned at ticket gates.
During a three-month pilot scheme, 6,000 mobile phone rail tickets were sold.
