Personal finance predictions for 2010: Phones become payment tools

Ten years hence, we may look back on 2010 as the year our cell phone became a pay phone.

"What we're going to see in 2010 is a lot of phone apps become payment-enabled," predicts George Peabody, director of emerging technology advisory service for Mercator Advisory Group.

The "it" app for 2010 is PayPal X, which enables software developers to embed payments via PayPal into new applications for Web-enabled cell phones. PayPal X is the payment app behind Twitter's TwitPay. Other players in online payment development are Amazon Payments and Google Checkout.

PayPal X is not a card transaction, but it's getting there. It allows users to make person-to-person (P2P) payments, split payments among several recipients and aggregate multiple payments into one lump transaction.

Mobile payment via phone apps offers a tantalizing alternative to the near field communications (NFC) platform being tested in the credit card world. NFC allows users to wave their cell phone in front of a reader rather than swipe a card to make a credit card purchase. Visa unveiled its first NFC-enabled cell phone in Malaysia this year.

The obstacle for NFC in the United States is that most merchant card terminals do not even read smart cards, whether NFC or the European standard EMV; they only read magnetic stripes.

Merchants who have been reluctant to foot the bill for smart terminals like the look of the mobile Web, which may enable them to reap the online harvest without the hardware investment. EBay estimates the value of goods sold via its eBay iPhone app topped $400 million this year alone.

"The original image of tap-and-go NFC has been leapfrogged by the mobile Web," says Peabody. "We've got a much more interesting and capable and programmatic platform now with these smart-phone devices."

Peabody says many platforms and players are competing to move e-commerce into the physical world of cell phone handsets and terminals, as well as to tap into the lucrative account-to-account (A2A) and P2P markets.

Which will gain traction and be anointed by the card companies remains to be seen. But by this time next year, your handheld device of choice may finally become a pay phone.

"As far as pilot programs, we're past that. I think it's going to be more of a deployment year for these software-oriented approaches," says Peabody.

Next in the countdown, 5:  Your paycheck

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