Digital wallets mooted

Smartphones to dispense cash

Credit/debit cards could soon be a thing of the past
Mobile Wallet.png

Betamax, personal digital assistants, Walkmans, Encyclopaedia Britannica and now Newsweek, have all disappeared or mutated in the face of new technology. Is the same fate about to befall the magnetic-strip credit/debit card?


The cause of the demise, some say, will be near-field communication, something that technology pundits have been talking about for years, but which now looks to become a mainstream reality. And, yes, it does have a three-letter acronym.


Near-field communication (NFC) uses radio-frequency identification (RFID) technology to transfer information from one device to another, when they are held a few centimetres apart—in other words, without physical contact.


Contactless plastic cards are already in use all around the world: our very own Gautrain uses them very successfully, local banks are rolling out contactless cards with the National Department of Transport (NDoT) application loaded, as does the London Underground, to name just a few examples.


The killer app (quite literally) will be enabling smartphones with NFC and credit/ debit chips to become contactless wallets.


After all, the argument goes, we use our smartphones for an increasing range of functions, from checking the weather to sending and receiving e-mails to watching YouTube, to getting directions to a restaurant. Because they are with us at all times, they have truly become all-purpose devices, and so it only makes sense to use them to pay for things as well.


Imagine paying your bar tab, McDonald's or even your groceries with your phone. On a more futuristic note, a near-field device could be attached to your skin to monitor a health condition; the data could then be transmitted to your smartphone and sent to your health practitioner.


But will NFC kill the plastic card?

Not any time soon – especially in South Africa – is the short answer. One reason is the sheer cost of rolling out contactless readers, especially given the fact that we have only recently completed the rollout of readers for chip cards with PINs.


A second – and perennial – challenge is establishing who owns the customer relationship. Given the extent to which customer loyalty has weakened in the past few years, do not expect this issue to be resolved easily.


An even more potent threat could be the development of payment technologies that do not need NFC at all. Consider Gust, a payment technology developed by MXit, which uses GPS for authentication.


Having said that, though, no one ever expected Britannica to stop publishing books. As more and more smartphones become enabled with NFC – and Juniper Research estimates one in five by 2014 – contactless payment will increase. In fact, Juniper estimates the mobile payment market will be worth $675 billion by 2015.


One thing, though, is clear. We are all carrying too much plastic around with us. It is inevitable that the digital wallet will develop to rid us of this wallet clutter, but the jury is out and deliberating as to when and in what form factor. It’s going to be an interesting ride!


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