Are Mobile Payments the Future?

By | November 23, 2011

More people are using their mobile phones to make payments for products and services than ever before, but does this trend signal an end to things like credit cards or will handsets sit alongside older payment methods?

Mobile payment is only becoming possible because of technological advances converging with the right kind of software.

Google is one of the key supporters of mobile payments because it is endowing branded smartphones like the Galaxy S with NFC (Near Field Communication) chips, which allow for non-contact interaction with payment kiosks.

Google Wallet is the associated service from the search giant which enables users to link their mobile to an account from which funds will be drawn when it is used at compatible tills in shops and other outlets.

Of course, to access this, you need both an Android-powered smartphone with an NFC chip in it, a Google Wallet account and access to the kinds of places where you can actually use it.

This approach also requires that you do not mind channelling all of your financial transactions through Google, which is something that privacy campaigners might take issue with if concerns over security and operational transparency are not adequately answered.

Google is not the only company involving itself in the world of mobile payments, but it is certainly one of the largest.

Rival company, Isis takes a slightly different approach to this technology, choosing to offer its services to a multitude of existing payment card companies and financial institutions so that users get a bespoke service, which is not tied down to one company but operates in a neutral space.

Google’s model is appealing in the short term because it promises to get the network infrastructure out there and put mobile payment capabilities in the hands of the masses.

In exchange it will use advertising and access to personal information to make back its investment, which in the short term is even recognised by Isis as being necessary to kick-start mobile payment on a mainstream level.

However, Google’s dominance is not assured because as long as there are alternatives that offer a different spin on the service, there will be consumers willing to put their money elsewhere.

At the moment most people will not be parting with their credit cards in favour of a mobile-fuelled payment process.

This is because mobile payments via NFC are currently capped at a very low level, allowing you to pick up a few groceries or perhaps pay for a bus ride, but not shell out for a big screen TV or meal for two.

There is little doubt that mobile payments are here to stay and in the long run our digital wallets may well replace our physical cards and cash.

Once reason NFC can flourish is because it is about more than just exchanging cash; it can be integrated into retail experiences and advertising in many different ways, so will evolve as a subsidised service in the coming years.

The companies behind credit cards, including Visa and American Express, are already backing mobile payment platforms, so these big names are unlikely to disappear as a result of the industry’s growth.

Note from the Editor: This is a guest post.