The mobile wallet

7 Apr 2011

Near field communications is becoming more prominent, potentially turning the humble mobile phone into a means of paying for products.

Imagine paying for goods and services using just your mobile phone. You wouldn’t need a wallet, credit card or cash. To buy something, you’d simply need to tap or scan your phone on a vendor device at the point of sale and the money would be deducted from your account.

The technology for this payment system is already here, and in fact, has been for quite some time. Near field communications (NFC) is a secure technology which allows two different devices to swap information by tapping them or holding the devices closely to each other.

Using smart tags or NFC chips, devices can swap numerous forms of data between each other.

This can be used in an unlimited amount of ways – from transferring photos between other phones to scanning movie posters to get extra goodies.

The most interesting use of the technology is mobile payments. This payment method has taken off in Japan, where customers can use their NFC-enabled devices to buy train tickets or to buy products in stores.

NFC on smartphones

While NFC hasn’t taken off here in Ireland, the technology is on its way. A big break has been seen with Google’s implementation of NFC on its flagship smartphone, the Nexus S.

The latest upgrade of Android 2.3 will also bring NFC support, meaning soon many Android developers will be making NFC apps and many hardware manufacturers will implement this technology into their phones. RIM also announced that upcoming BlackBerry phones will include NFC.

Rumours have also been widespread about whether or not the next iPhone, due out in the summer, will include NFC technology.

“We believe Apple will have NFC on it in June. If they don’t, they could lose out,” said John Wall, sales director at Zapa Technology, an Irish company that provides NFC solutions across Europe.

Zapa Technology aims to bring this technology into mainstream use in Europe and has already begun trials of the service through retail schemes.

Working with AIB Merchant Services, the company has brought in NFC tags to Insomnia cafes and small retailers in Dundalk and Tuam.

Customers can stick their own smart tags onto their phone where they can scan them on these vendor terminals. By doing this, they can take part in initiatives such as loyalty schemes, earning points on their phone so they can reap the benefits with these retailers at a later date.

The idea is to get customers used to using their phones to carry out transactions and it seems to be working, with 70pc of those who took part in the scheme sticking the tags onto their phones.

“We were concerned initially that the older customers might not like the idea of putting something like that on their phone but we found they took to it as easily as younger people did,” said Wall.

The challenge Wall sees in implementing mobile payments across the nation is how fast retailers and firms will take up the technology.

“The whole thing about NFC is that it needs to be a collaborative programme where the mobile operators, banks and retailers have a common interest in rolling NFC out,” said Wall.

“That takes time because, by nature, retailers are conservative and they tend to watch and see how things are going.

“That’s our challenge. With the interest now and other players trying to get into the payment space, there seems to be more of a move now,” he said.

NFC trial in Spain

O2 is also looking into the area of mobile payments and its parent company Telefónica has already conducted a trial in the resort town of Sitges in Spain.

The trial equipped 1,500 customers with NFC-enabled handsets and gave 500 retailers NFC readers.

“What that meant was that customers could use their handsets to pay for goods and services in store by tapping their phone against a reader – the expression is ‘tap and go’,” said Aideen Chambers, head of financial services at O2 Ireland.

The project went very well for both the consumer and the retailer.

“The trial was such a success that the town continued on using the technology after it finished. Merchants have found that customers use NFC handsets for lower-value transactions and that they would have carried out more transactions than expected,” said Chambers.

Chambers also pointed out that O2 UK was working on NFC trials within the UK; this will mean that when Ireland is ready for NFC it won’t have to start from scratch.

“The challenge for us in the Irish context is making sure we get the retail side of the industry to see the benefits and to accept the area of contactless and, later on, NFC payments,” said Chambers.

While the preliminary steps are being taken, it seems it may be a few years before mobile payment fully becomes mainstream in Irish retail. However, the trials have shown there is a demand for mobile payments and loyalty schemes, and once we’re ready to take the next step, it could have a huge impact on how retailers and customers purchase goods in the future.