Mobiles ring in the end of the wallet

Telecoms groups, banks and retailers are finally ready to turn your phone into a payment device. Nick Clark reports

This is the year that British consumers will be able to load up on Big Macs with a swipe of their phones. Or is it? Experts say the perfect storm that will allow "wave and pay" with mobiles is nearly upon us, but are people ready to trade in their wallets?

McDonalds revealed in January that it was to install readers to accept contactless payments in 1,200 branches this summer. Initially, it will allow customers to buy their food with contactless cards, and later with their mobile phones.

It seems the will is finally there between the mobile phone handset makers, operators, banks, payment processors and retailers to push contactless payment.

British consumers are already familiar with mobile payments via premium texting, with the charge added to their phone bills, as well as downloading applications to their phones on the move. The next generation is turning the mobile phone into a digital wallet. Alastair Lukies, chief executive of mobile banking payments group Monitise, said: "Putting a chip on a mobile phone is no different to a dumb NFC card. When it is integrated with the phone, and it can talk to apps, where you can check your balance and get a digital receipt, then it becomes interesting."

The agreed standard for the contactless payments is Near Field Communication (NFC) technology, a short-wave radio system which transmits data small distances.

Analysis group Juniper Research predicts the value of contactless payments and ticketing using NFC will hit $113bn (£70bn) per year by 2016. Howard Wilcox, lead analyst at Juniper, said: "2011 is the year when the first mobile contactless payment will be available in the UK." He forecast a million NFC devices will be shipped this year. "It needs a change in mindset. Your phone becomes your wallet," Mr Wilcox added. The system has been designed to buy low-value items such as refreshments, newspapers or train tickets, with purchases likely to be capped at £15. But do consumers want to use their phones to pay? Helen Karapandzic, the lead consultant at Analysys Mason, said: "There certainly has been consumer interest but it needs a fundamental shift in their behaviour. Consumers don't really see the need for it at the moment.

"Consumers need to see the benefits. Banks could pass on the savings they make as they don't have to issue cards. There should be a time-saving element, and increased control and accountability via payments." The companies could then start combining it with loyalty points and couponing, Ms Karapandzic added.

This will be driven by the rise of smartphones with NFC chips. Currently there is only one device – the Samsung Galaxy S – and that is not designed to allow payments.

Yet, smartphones will increasingly include the NFC chips. Juniper estimates that by the end of 2014, 300 million devices will be able to offer their users swipe and pay. Research in Motion, the maker of BlackBerry, has already said that it intends to put the chips in most of its new devices, and Google, which developed the Android smartphone platform, has also backed the technology.

The analysts said backing from marquee names would help bring the technology in faster. The industry is waiting on comments from Apple. It is understood there will be no NFC technology in the next iPhone – whether that is the 4GS or the iPhone 5. Yet, Apple is working on introducing some form of contactless payment next year. The take up by the mobile industry has been helped as the cost of the chips has fallen from around $5 three years ago to closer to $2 currently.

Yet the growth of devices is useless without the backing of the merchants and those supporting the payments. "Merchants are beginning to respond," Ms Karapandzic said.

It also has the backing of the banks and the payment processors. Mr Lukies, of Monitise, believes that rather than suffer a shake up in the market, these giants will benefit from new technology. "The regulators and banks will always be at the centre of anything to do with money, then there will be the trusted partners such as Visa, MasterCard or American Express. They may be challenged but they won't be displaced. The difference may be farther away, where opportunities emerge," he said. There will also be different revenue models emerging, with companies offering discount payments or loyalty cards when their phones are detected.

Visa has heavily backed NFC. Beyond existing contactless cards it has teamed up with Samsung to offer contactless mobile payment in the UK in the run up to the London Olympics next year. The companies said it would leave a "lasting legacy in the market" after the event finishes. Separately, Orange has secured a deal with Barclaycard to introduce contactless payments.

New winners will emerge, including companies such as ViVOtech, which makes the point-of-sale terminals. Mobiles have also allowed new payment technology to emerge such as Square, developed by Jack Dorsey, the co-founder of Twitter. The company has developed technology to allow a phone to accept a credit card payment and has already raised $27m in funding.

The contactless technology has been discussed in the industry for years, but finally the "perfect storm" of different stakeholders agreeing is close, according to Mr Lukies.

The NFC Forum, a not-for-profit industry association, was set up in 2004 and now has 140 members. The technology has already been widely deployed in Japan, although instead of NFC it uses a system called FeliCa. In February, its operators and those in South Korea revealed they would move to the global standard. In Europe, Orange is running a commercial pilot in Nice, dubbed Cityzi, which covers 3,000 customers. A similar trial was run in Spain by Telefónica, Visa and La Caixa. It proved a success and the project promoters are leaving the terminals with the merchants indefinitely.

Mr Lukies said the technology would almost emerge by stealth. "Almost before you've realised it, half of the country will be using their mobiles to pay for stuff. It is the same as chip and pin, which was talked about by the industry for years before it was introduced, as well as internet banking." But will it be this year? No, he said: "The parts are coming together. The Olympics next year is a showcase event to show off this technology. It should fly from there."

PROMOTED VIDEO
Life and Style
fashionHealth concerns and 'pornified' perceptions have made women more conscious at the beach
Arts and Entertainment
tv
Sport
Ojo Onaolapo celebrates winning the bronze medal
commonwealth games
Arts and Entertainment
Rock band Led Zeppelin in the early 1970s
musicLed Zeppelin to release alternative Stairway To Heaven after 43 years
Arts and Entertainment
High-flyer: Chris Pratt in 'Guardians of the Galaxy'
filmHe was homeless in Hawaii when he got his big break. Now the comic actor Chris Pratt is Hollywood's new favourite action star
Sport
Van Gaal said that his challenge in taking over Bobby Robson's Barcelona team in 1993 has been easier than the task of resurrecting the current United side
footballA colourful discussion on tactics, the merits of the English footballer and rebuilding Manchester United
Life and Style
Sainsbury's could roll the lorries out across its whole fleet if they are successful
tech
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Travel
The shipping news: a typical Snoozebox construction
travelSpending the night in a shipping container doesn't sound appealing, but mobile crash pads are popping up at the summer's biggest events
Arts and Entertainment
'Old Fashioned' will be a different kind of love story to '50 Shades'
film
Arts and Entertainment
Tracey Emin's 'My Bed' is returning to the Tate more than 15 years after it first caused shockwaves at the gallery
artTracey Emin's bed returns to the Tate after record sale
Arts and Entertainment
Smart mover: Peter Bazalgette
filmHow live cinema screenings can boost arts audiences
Environment
Neil Young performing at Hyde Park, London, earlier this month
environment
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Project Manager (HR)- Bristol - Upto £400 p/day

£350 - £400 per annum + competitive: Orgtel: Project Manager (specializing in ...

Graduate / Trainee Recruitment Consultant - IT

£25000 per annum + OTE £40,000: SThree: Orgtel are seeking Graduate Trainee Re...

HR Business Partner - Banking Finance - Brentwood - £45K

£45000 per annum + Benefits: Ashdown Group: ** HR Business Partner - Senior H...

PA / Team Secretary - Wimbledon

£28000 - £32000 per annum + Benefits: Ashdown Group: PA / Team Secretary - Mat...

Day In a Page

Save the tiger: The animals bred for bones on China’s tiger farms

The animals bred for bones on China’s tiger farms

The big cats kept in captivity to perform for paying audiences and then, when dead, their bodies used to fortify wine
A former custard factory, a Midlands bog and a Leeds cemetery all included in top 50 hidden spots in the UK

A former custard factory, a Midlands bog and a Leeds cemetery

Introducing the top 50 hidden spots in Britain
Ebola epidemic: Plagued by fear

Ebola epidemic: Plagued by fear

How a disease that has claimed fewer than 2,000 victims in its history has earned a place in the darkest corner of the public's imagination
Chris Pratt: From 'Parks and Recreation' to 'Guardians of the Galaxy'

From 'Parks and Recreation' to 'Guardians of the Galaxy'

He was homeless in Hawaii when he got his big break. Now the comic actor Chris Pratt is Hollywood's new favourite action star
How live cinema screenings can boost arts audiences

How live cinema screenings can boost arts audiences

Broadcasting plays and exhibitions to cinemas is a sure-fire box office smash
Shipping container hotels: Pop-up hotels filling a niche

Pop-up hotels filling a niche

Spending the night in a shipping container doesn't sound appealing, but these mobile crash pads are popping up at the summer's biggest events
Native American headdresses are not fashion accessories

Feather dust-up

A Canadian festival has banned Native American headwear. Haven't we been here before?
Boris Johnson's war on diesel

Boris Johnson's war on diesel

11m cars here run on diesel. It's seen as a greener alternative to unleaded petrol. So why is London's mayor on a crusade against the black pump?
5 best waterproof cameras

Splash and flash: 5 best waterproof cameras

Don't let water stop you taking snaps with one of these machines that will take you from the sand to meters deep
Louis van Gaal interview: Manchester United manager discusses tactics and rebuilding after the David Moyes era

Louis van Gaal interview

Manchester United manager discusses tactics and rebuilding after the David Moyes era
Will Gore: The goodwill shown by fans towards Alastair Cook will evaporate rapidly if India win the series

Will Gore: Outside Edge

The goodwill shown by fans towards Alastair Cook will evaporate rapidly if India win the series
The children were playing in the street with toy guns. The air strikes were tragically real

The air strikes were tragically real

The children were playing in the street with toy guns
Boozy, ignorant, intolerant, but very polite – The British, as others see us

Britain as others see us

Boozy, ignorant, intolerant, but very polite
How did our legends really begin?

How did our legends really begin?

Applying the theory of evolution to the world's many mythologies
Watch out: Lambrusco is back on the menu

Lambrusco is back on the menu

Naff Seventies corner-shop staple is this year's Aperol Spritz