NFC: Mobile Wallets Coming Soon? Keep Waiting

U.S. shoppers awaiting the day they can wave their cellphones at the check-out counter to buy everything from books to shoes should hang onto their wallets a while longer.

About a decade after they were dreamed up by engineers and marketers, mobile wallets are still far from commonplace in the United States, due in large part to a combination of industry infighting, consumer tastes and regulatory hurdles.

That has not stopped banks, phone makers and technology companies -- fearful of being left behind -- from trumpeting the concept.

At the annual CTIA wireless tradeshow last week, service providers such as Sprint Nextel, credit card networks like Visa Inc and card reader firms like Verifone Systems all talked up the promise of mobile wallets.

Manufacturers including HTC Corp and Nokia said they are ready to embed inexpensive chips into phones to make them work like credit cards. The card networks have been preparing services for phones for years and mobile network operators are jumping in.

The industry-wide interest has created another problem: Everybody is now jockeying for a piece of the future.

Currently, credit card companies charge merchants transaction fees. But other players in the future of mobile payments such as wireless operators AT&T Inc and phone makers from Research In Motion to Apple Inc are likely to demand a cut of sales as well.

This puts U.S. retailers in the uncomfortable position of possibly likely surrendering more from their margins.

"There are many people who want a piece of the pie and I don't know how to make the pie bigger," Dickson Chu, global head of new products for Citigroup, told Reuters after a panel at the conference.

"You've got a lot of pushing and shoving about what the business model is," added James Anderson, MasterCard Worldwide vice president for mobile.


In the technology early-adopter culture of Japan, more than a fifth of the population is registered for mobile payments, according researcher Celent. Services there included train ticket purchases by phone.

Pitching U.S. consumers on the benefits of the technology will be tougher.

"If the only thing that these new entrants are bringing to the market is another way to pay for stuff you already buy and their business model is to extract a piece of the transaction (fee), then it's going to take a long time," to become popular said Forrester Research analyst Charles Golvin.

Giving people reason to use the system appears to be part of the thinking behind Google Inc's latest agreement with Citigroup and Mastercard to enable users of phones that run Google's Android software to make payments, according to a report in the Wall Street Journal citing unnamed sources.

Automatically applying discount coupons, adding points to a shopper's loyalty programs and delivering electronic receipts are some ideas that could work well, said David Talach, a vice president for Verifone Systems Inc. Verifone has also been linked to Google's plans, according to the Journal.

Google and its partners are relatively late to test these types of systems. Last year, Visa Inc tested a similar system with several U.S. banks including Bank of America Corp and Wells Fargo & Co. The companies have said the system will be commercially available later this year.

Verizon Wireless, AT&T and T-Mobile USA also last year formed Isis, a mobile payment joint venture with the Discover Financial Services payment network.

Moreover, Google's heavyweight status in Silicon Valley provides no assurance of success.

Gwenn Bezard, a research director of payments at consultancy Aite Group, said Google's reported pilot is "one of the players among many others," and that the company has stumbled in its other payments efforts: "Google hasn't had much success with Google Checkout."

Using the wireless network to pinpoint where a shopper is located and sending coupons for specific stores is an idea that Sprint Nextel is pursuing, said Steve Elfman, Sprint Nextel's president for networks.

Sprint would generate advertising revenue rather than a transaction fee, which Elfman said could turn into a big business in the next three years.

"Advertising is going to be the more important revenue stream," he told Reuters. "When you can target advertising at a consumer where they are, it's going to be very relevant."

But despite the broad efforts across several sectors, some proponents of the system argued that perhaps it would take the galvanizing force of Apple Inc to push mobile payments into the mainstream.

Apple has yet to unveil a mobile wallet strategy. But if it does, as analysts widely expect, another point in its favor is the more than 160 million consumers who have already trusted Apple with their credit card details to use its iTunes music and app store.

"Apple is in a position to play a very strong role," said CCS Insight analyst John Jackson. "It could do it in a way that on the one hand shuts rivals out, but on the other hand, makes the market happen."