AT this
point, smartphones are practically permanent attachments to our hands. But that
quickly changes the moment you need to pay for something at a store and you
take out a credit card.
The idea of
using your phone as your wallet — for storing payment methods and even swiping,
scanning or tapping it to pay at the checkout register — is a long-promised
future that has been surprisingly slow in coming. Multiple technologies exist
for mobile payments, but there is no clear winner and a lot of chaos.
“Mobile
payments, it’s been the next big thing for three or four rounds of next big
thing,” said James Wester, the director of global payments research at IDC
Financial Insights. “I would say we’re probably still three to maybe five years
away from seeing mobile payments really common, with most of us using it.”
But
recently, several new products and services have been released that could make
mobile payments more convenient and worth trying. Before you dive in, though,
it’s best to have a map of this complicated landscape.
CreditAndy
Chen/The New York Times
Amazon
introduced an experimental
app this month
that lets people store gift cards and loyalty cards from a variety of retailers
and check some balances on Android phones and Amazon devices. You can display
the gift cards as a bar code or QR code (that odd checkered square on many
products now) so that it can be scanned at a register.
So far, you
can’t store credit or debit card information on the app. But Amazon already has
a payment platform that lets you pay individuals or check out at some online
stores, so the app could be a short hop away from being a full-fledged mobile
payment service.
PayPal, the
online payment giant, has also released new payment options, with an updated app for iOS, Android and Windows
Phone that lets you store loyalty cards (like those used at grocery stores or
pharmacies) in addition to your regular PayPal sources.
Some new
partnerships PayPal has reached with some stores, restaurants and services,
including Uber and Jamba Juice, also provide interesting payment twists.
People
using the new app can order ahead from a participating restaurant and pay with
their phones. Or if you are dining out, you can pay your bill on your phone
instead of waiting for the check (and waiting for a server to retrieve your
credit card, swipe it and bring it back). Many of those stores and restaurants
also offer coupons or discounts as an added enticement.
At Home
Depot, a partnership with PayPal lets you check out by choosing PayPal instead
of credit or debit at the store’s payment terminals. Then, instead of entering
a debit PIN, you enter your phone number and a PIN you previously set up on the
PayPal app. No wallet or phone required.
And then
there are the persistent rumors that Apple will introduce a mobile payments
service tied to iTunes accounts, perhaps based on the existing Passbook app.
Apple recently added a feature called iTunes Pass that lets users load money
into their accounts (although this must be done in person at an Apple store) to
make purchases. The company also allows users to load and organize gift cards
through Passbook; like Amazon, it could potentially tie Passbook to credit
cards stored in iTunes to allow purchases elsewhere, too.
But so far,
the company that has had the most success at creating popular, usable mobile
payments is Starbucks. The Starbucks mobile app lets you pay for items with
your smartphone at the company’s coffeehouses and also accumulate rewards like
free food or drinks.
Howard D.
Schultz, Starbucks’ chief executive, told investors in July that mobile
payments made up about 15 percent of its sales transactions in the United
States and even hinted that the company would try to share
its payment system with
other retailers.
If all
these efforts by so many companies still sound like a messy playing field, you
are right, and those examples are just scratching the surface. Part of the
reason so many different apps and mobile wallets exist is that the previous
attempts at mobile payments — based on tap-to-pay or contactless payments —
took so long to get moving.
But now,
there’s interesting movement in those technologies, too. The trouble is, many
standards have not yet been worked out.
Contactless
payments work using a technology called N.F.C., which stands for near-field
communication. It’s kind of like short-range radio. When you pay for something
at one of these contactless terminals, you tap or wave your phone in front of
it, enter a PIN, and you’re done.
Your phone
must have an N.F.C. chip in it for this to work. Most new Android phones and
some Nokia Lumia Windows Phones have N.F.C., but iPhones do not.
Contactless
payments have had a checkered history. At the moment, the two major mobile
payment systems that use N.F.C. are Google Wallet and the Isis mobile wallet
app, which was a joint creation of AT&T, Verizon and T-Mobile. (Isis mobile
wallet is in the process of changing its name to avoid confusion with the
violent militant group wreaking havoc in Iraq and Syria.)
In the
past, N.F.C. payments required actual hardware: a so-called secure element
within a SIM card, the card that identifies you as a carrier subscriber when
you insert it into your phone. When you install the Isis mobile app, you can
order the enhanced card free or pick it up from your carrier. Newer phones will
have this type of card by default, Isis said. But most existing phones
do not.
Worrying
about a new card is a hassle. Worse, the card also puts the carriers in charge
of the mobile payments world, and the companies have tried to keep out
competitors. The carriers often blocked Google Wallet from being downloaded
onto devices on their networks, though that practice has mostly stopped. (I was
able to download the app on a Samsung Galaxy S5 and LG G3.) An Isis spokesman
wouldn’t say whether blocking of the app might continue.
But other
companies aren’t going to sit on their hands and accept Isis. Already, new
technology built into the latest version of Android, technology that already
existed in BlackBerry phones, makes the extra security unnecessary. The
technology, called host card emulation, or H.C.E., lets apps like Google Wallet
retrieve stored credit card information from the cloud.
Visa and
MasterCard have approved use of their cards with H.C.E. — basically, the Google
Wallet app has permission to act just like a credit card. And potentially, many
apps will soon be able to let you make contactless payments, not just Isis or
Google Wallet.
One other
note, of course, is that contactless payments cannot happen without payment
terminals in stores that can read the signals. Not every merchant has those
terminals or wants to upgrade.
But those
upgrades look like they will be coming. Most American credit card companies are
migrating from cards that use a magnetic stripe to those that use a microchip
to store information. Those microchips work with contactless payment terminals,
so the credit card migration could also help out N.F.C.-based mobile payment
methods.
It is
unclear exactly how the iPhone will fit into this, because it can’t make
contactless payments using N.F.C. Now, if you want to use Isis mobile wallet
with your iPhone, you’ll have to buy a special case that includes the N.F.C.
antenna. There are few options, and they cost
about $70. And it’s
unclear whether they will work with an N.F.C. payment app like Google Wallet.
See? There
is still a lot yet to be solved before mobile payments are as popular as credit
cards.
But the new
options popping up are exciting, and once you get the hang of them, they can
actually make paying a little easier. I, for one, am hooked on my Starbucks
app. But it’s easy to forget that many people still are not comfortable
shopping online and are far from storing credit card numbers on a phone app and
paying that way.
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