“Pay By Phone” Takes on New Meaning

It used to be that “pay by phone” meant consumers could pay their bills using the telephone. This year, though,that meaning will shift to literally paying by phone – using a smartphone as a mobile payment device. And that could dramatically change the way consumers purchase goods and services, both offline and online.

Mobile payment services such as Boku, and an unprecedented joint venture bringing arch-rivals AT&T, T-Mobile, and Verizon together to form ISIS, a national mobile commerce network, are two of the developments that promise to revolutionize consumer payment habits.

Michael Abbott, CEO of ISIS, said:

“We believe the venture will have the scope and scale necessary to introduce mobile commerce on a broad basis. In the beginning, we intend to fully utilize Discover’s national payment infrastructure as well as Barclaycard’s expertise in contactless and mobile payments. Moving forward, ISIS will be available to all interested merchants, banks and mobile carriers.”

ISIS better get moving – it seems Google is now readying to enter the Near Field Communications technology (NFC) market. NFC allows information to be transmitted from as little as 4 inches away.  According to Bloomberg Businessweek, “Google is considering building a payment and advertising service that would let users buy milk and bread by tapping or waving their mobile phones against a register at checkout…” This service may be introduced as early as this year.

Meanwhile, PayPal, owned by eBay, may begin a commercial NFC service later this year, and Visa could introduce “contactless payments” by the middle of 2011. Visa already has “payWave” and MasterCard offers “PayPass,” both of which use contactless payments made by waving or tapping an enabled credit card or key fob on a reader. While this extends the convenience factor of credit or debit cards, it’s still linked to a traditional plastic card.

With NFC, smartphones could actually replace credit and debit cards, and the rapidly increasing penetration of smartphones could speed up the pay by phone phenomenon. It’s all coming to a head because of the development of a single secure NFC chip that fits into a smartphone. The chip can contain the user’s financial account information, including credit cards, debit cards, gift cards, loyalty cards, coupon subscriptions, and so on. It also makes it possible for consumers to execute online purchases from a smartphone, since Internet-enabled phones are becoming more common.

Charles Walton, COO of Inside Secure, an NFC chipmaker, told Businessweek, “NFC could displace the cash register. This is going to come superfast.”

Google could potentially have a leg up in the NFC space through its Android operating system. In early December, the newest version of Android was released by Google and, not surprisingly, it contained a number of NFC features. Supposedly, the Android-based Samsung Nexus S smartphone may be a test platform for the Google payment service. Other smartphone makers are actively pursuing NFC, according to Businessweek. Both Apple (iPhone) and Research in Motion (BlackBerry) recently filed NFC-related patents.

Peter Pachal of PC Magazine was appropriately skeptical, but he did suggest that 2011 may indeed be the year of NFC:

“In all likelihood, the system that ultimately takes mobile payments mainstream will be a partnership between several companies. NFC technology has had several false starts in recent years, but it’s seeing more interest from major corporations recently than ever before. 2011 could be its breakout year.”

ReveNews ranked mobile as one of the six events that shifted the online marketing landscape in 2010. In 2011, the mobile onslaught will assuredly continue, and part of that push will be using smartphones as mobile wallets.

Let’s face it – it was just a matter of time.

About Barry Silverstein

Barry Silverstein is a freelance writer/marketing consultant. In addition to writing for ReveNews, he is a contributing writer to Brandchannel.com, the world’s leading online branding forum. He is the author of three marketing books, The Breakaway Brand (co-author, McGraw-Hill, 2005), Business-to-Business Internet Marketing (Maximum Press, 2003) and Internet Marketing for Technology Companies (Maximum Press, 2003). Barry ran his own Internet and direct marketing agency for twenty years. You can find Barry on Twitter @bdsilv.

3 Responses to “Pay By Phone” Takes on New Meaning

  1. Paypal may introduce this by mid-2011? I'm using it already. Paypal's BlingNation.com, called BlingTag, started in Sept. 2010 in Palo Alto.

    It's a small button, the size of a postage stamp, that sticks to the back of my phone. At 30+ Palo Alto stores, shops, restaurants, and cafes, I pay by tapping my phone against a small device at the cash register. The amount is deducted from my Paypal account. I get a receipt by SMS and email . Instant and easy.

  2. While NFC will surely play a role in enabling mobile payments, I question whether a widespread adoption of the technology will ever take place: Is there a consumer need for NFC? Is the benefit of tapping a phone that much greater than swiping a debit or credit card?

    As I recently opined in my blog, I don’t see NFC being the solution to driving consumer mobile payments: http://blogs.sybase.com/mobileservices/2010/08/do

    Cameron Franks, Area Vice President, Sybase 365

  3. While NFC will surely play a role in enabling mobile payments, I question whether a widespread adoption of the technology will ever take place: Is there a consumer need for NFC? Is the benefit of tapping a phone that much greater than swiping a debit or credit card?

    As I recently opined in my blog, I don’t see NFC being the solution to driving consumer mobile payments: http://blogs.sybase.com/mobileservices/2010/08/do

    Cameron Franks, Area Vice President, Sybase 365