Forget about mobile payments. The future is the mobile walle
Source: Galen Gruman
In some circles, the notion of a smartphone acting like a credit or debit card is fascinating, and you see story upon story about mobile payment-enabled smartphones and the potential rise of PayPal, the telcos, and such as the new payment processors. Who cares? Even if Visa and MasterCard were somehow to let go of that billion-dollar processing business, you're merely replacing one financial processor with another.
And the fact that a smartphone could act as a card is an inconsequential change. You still have to carry a wallet, and as long as that's the case, a simple plastic card is frankly easier to use, given that the technology for reading them is universal and all the proposed mobile alternatives require new, often separate, readers and work only with certain vendors (so you'll still be carrying plastic for the other banks' and merchants' systems). As a friend recently said, payments can't get more mobile than they already are.
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So replacing credit and debit cards with something embedded in your smartphone is not worth the bother. But what if you could replace the entire wallet? That would be a worthwhile change. And the pieces of technology to enable that are coming together.
Open your wallet, and what do you have in it? A driver's license or other government ID. Credit and debit cards. Cash. An insurance identification card or two. Probably some family photos. Perhaps a library card, a store loyalty card, a transit pass, and a company or building ID or access card. Maybe a few other membership cards.
Most of these cards are really just information holders, storing an account number or membership number. Those are easily replaced with data on your smartphone, which could be presented when needed in any of several ways: As a facsimile of the physical card, as a bar code or QR code for scanning (such as already used by many airlines for electronic boarding passes), or as bits in an embedded NFC or RFID chip. So, one or more apps could easily handle these information cards' data.
I'd expect Google, Apple, Microsoft, and RIM to each offer such an app as part of the core app collection on their respective mobile OSes. What would be required is a common API for libraries, insurers, museums, and so on to provide their identification information to such an ID app and, such as in the case of building-entry cards, to receive confirmation for logging purposes.
Such an ID app would have a major advantage over physical wallets: If your smartphone is lost or stolen, you can log in to your account and invalidate those accounts on that device, and transfer them to a new one. That capability already exists today in Apple's Find My iPhone app, which has been copied by third parties for use on other devices. Find My iPhone can locate and then lock or wipe a missing device, but it's not a stretch to see that it could also deauthorize that device for credentials stored in the ID app.
Credit and debit cards are really no different than any other information card, at least in the U.S. The PIN is not stored on the card, and the card doesn't do anything active to prove its identity; there are no smarts on the card. But there could be on a smartphone version, such as alerts when you've reached specified balance thresholds.
Transit passes and the like are stored-value cards, where the card's data is updated each time you make a transaction. So the reader not only reads your current balance (and account information, so it can log the transaction for you to see in a printed or online statement) but updates that balance by changing the information on it. That's a bit trickier than information cards, but not much. NFC would allow the smartphone to receive new data, as would some forms of RFID chips. A scan-oriented reader, such as those that read QR codes, could display a QR code after the transaction is complete, and the smartphone app presenting its QR code could read the reader's QR code and update the smartphone's stored value for that account. But that's clunky and requires pricier readers.
A simpler option is to transmit the new balance to the smartphone over 3G or Wi-Fi to update it when the smartphone has Internet access. That can be less than real time in some cases, but it works well enough in many transit systems that had to account for times when the train or bus reader was not connected wirelessly and so later update the electronic transit pass.
Cash could be handled as any other type of stored data, such as a transit pass. The balance data could be stored on the smartphone itself (better for those fearful of having their finances tracked), or transmitted to a server, as is the case with those prepaid debit and credit cards. Like real cash, if you lose your smartphone, you lose your cash.
In this day of e-cash (debit cards), printed cash seems antiquated. I've long thought the government should offer us all cash cards that we can recharge electronically, but that hasn't happened because Congress doesn't want its friends in the banking industry to lose all those processing fees. (It's the same reason the government will scan your printed tax return at no charge but is barred by Congress from directly receiving your electronic return: Congress wanted to create an income source for its friends by mandating only they could transmit such returns -- for a fee, of course.) The barrier here is political, not technical -- and I bet it would be cheaper for both the government and retailers to move to e-cash than to keep handling printed cash.
Family photos are easy -- aren't they already on your smartphone?
Then there's the hard part: Driver's licenses and other government IDs. These need to be in a provably unique, untampered form. That likely means tying them physically to a smartphone, which starts to muck up the hardware design and of course makes it a hassle to update your device every few years as manufacturers and carriers want you to. One option is to have a universal ID "card" slot, sort of like the MicroSIM used for GSM-based 3G networks, where that government-issued ID can be moved from one device to another. But given how a decade after 9/11 the states still can't figure out how to issue an unforgeable, provably legitimate driver's license and the feds continue to struggle with similarly nonhackable passports, that seems a technology too far. A simpler option, at least as a transitional step, is that we'll all still carry that secured, provable government issued ID in the case that holds our smartphone.
I suppose we could all have a very small travel wallet for such an ID and a bit of printed cash, but as long as people have to carry both a wallet and a smartphone, it's hard to see how an e-wallet could really take off. Still, a travel wallet would likely be needed by international travelers for when they are overseas.
One last issue I've heard: What about power? A physical wallet requires no electricity to work, whereas a smartphone does. I'm not so concerned about that. Its' exceedingly common to have a charger at work, at home, and in the car. Now that the European Union has forced device makers to standardize on USB power, it's both cheaper and easier to connect a device to a charger, whether yours or someone else's.
Still, I can see people running out of juice and not being able to get a bus ride home, show the police officer their license, or pay for the groceries. Of course, the same is true when people forget their wallet, so do we really need a technical solution? If we did, an RFID chip is the answer: It requires no power, and so could be the backup identification and e-cash holder -- the equivalent of tucking a $20 bill behind your driver's license for emergencies and keeping a spare credit card at home in case you lose your wallet.
I fully expect that in the not-too-distant future the smartphone will become your wallet, and that folded leather or cloth contraption will go the way of the wristwatch: Abandoned by most, used as a retro fashion accessory by some. Which leads to one more change that will need to occur: Clothing designers will need to rethink the pockets in men's pants, as the back pocket will not be where you'll want to carry your smartphone/e-wallet.
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