Mobile payments will become ubiquitous in the next few years, according to a panel discussion at the SXSW conference over the weekend.
Unlike previous failed efforts to allow consumers to pay by tapping their mobile phones at points of sale instead of swiping credit cards, the new push to expand mobile payments is focused on transforming shopping, said Ryan Hughes, chief marketing officer of Isis, consultant Toni Merschen, and representatives from the digital security firm Gemalto.
Previous efforts to take mobile payments to the mainstream failed because shoppers saw little benefit in trading a payment card for a phone, and because merchants have been loathe to invest in new devices to accept payments. By contrast, the new model put forth by Isis would allow consumers to consolidate credit cards and customer loyalty cards in a wallet app that they can use to unlock deals when they enter a store.
"The card form is limited, Merschen said. "There's no such limit with mobile," which offers "a software mechanism to put all these things in."
With three of four US consumers already using mobile phones to help guide in-store purchasing decisions, Isis emphasises its mobile payment system's effect on the overall shopping experience. Isis is a joint venture of AT&T Mobility, T Mobile USA and Verizon Wireless with its payment system set to launch this summer in the US test markets of Austin, Texas, and Salt Lake City.
"We're not shifting the way that you pay. We're bringing you an opportunity to transform the way you shop," Hughes said.
Isis is addressing the problem of merchant adoption. Last week, it announced that leading suppliers of payment terminals had agreed to begin enabling the NFC (near field communications) that power mobile payments in all the machines they provide. Merchants who haven't moved to the new terminals by 2015 will assume increased liability for fraudulent credit card purchases at their stores.
As part of the Isis launch, major manufacturers of Android devices including Nokia, Sony and LG, will begin to include NFC in their phones. According to Hughes, 100 million NFC-enabled phones could be in use within "just a couple of upgrade cycles."
The panellists admitted there is another barrier to widespread adoption: People don't fully trust the technology.
But mobile payments using the Isis model are actually safer than credit card transactions, according to the panellists. The data on a card's magnetic strip can be "skimmed," allowing criminals to create a pirated card. But the security code attached to mobile payments using the Isis system will change. That data "is not static, so stealing it doesn't do you any good," Merschen said.
Also, a lost or stolen wallet app, unlike a lost or stolen "leather wallet," can be de-activated with one call to the mobile provider, said Gordon Beatty of Gemalto, a digital security vendor.
Beatty added that if a handset battery dies, the user would not be left without access to mobile payments, because the NFC reader could access the app with its own juice. However, in an example of some of the kinks that still need to be worked out, Hughes told the crowded ballroom that Isis had blocked that function in order to ensure that the wallet app was always protected with a PIN number.