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Digital wallets: The future of making payments

The digital wallet – i.e. using your Smartphone to pay for things – is a new concept that will provide consumers with a simple and more secure way to make payments. Contactless payment methods – such as near-field communication (NFC) – are rapidly gaining popularity. These methods allow people to speed up the payment process by essentially use their mobile phone as a wallet. The findings laid out in this article suggest that soon we could all have digital wallets; plastic cards and cash could be distant memories.

Ready to embrace

Many of us use credit cards for a variety of different reasons – from every day purposes such as grocery shopping, to balance transfers or emergency situations – and many of us have a multitude of cards to fit each individual purpose. Contactless payment methods will enable all of our cards to be digitally stored in one place – on our phones.

Group of smartphones

This is bound to make life easier, and there is research to support the theory that consumers are ready to embrace this technology and switch to digital wallets; Barclays recently conducted a survey that found two thirds of UK shoppers say carrying cash is inconvenient.

But this concept isn’t exactly new. In forward-thinking Japan, mobile payments have been popular for quite some time. According to the Telecommunications Carriers Association Japan, there are already 9.8 million people who have used their ‘mobile wallets‘ to make payments – and this research was conducted in December 2010. By now, that figure is likely to be considerably higher. And with the constant growth of the Smartphone market, the mobile wallet industry could soon be about to face a boom. This won’t be limited to Japan, either; other countries are likely to follow suit.

Preparing for the boom

In the US and UK, the major mobile network carriers are already encouraging the use of digital wallets through various joint ventures. They are working together to ensure a standard protocol, and to prevent customer confusion over a concept that will take time to adjust to. In the US, T-Mobile USA, AT&T Mobile and Verizon Wireless formed Isis, a system that allows users to pay for products, redeem vouchers and collect loyalty scheme points through swiping their mobile phones at participating retailers. A pilot scheme will be introduced in mid-2012.

In the UK, Everything Everywhere (Orange UK and T-Mobile UK), O2 and Vodafone are working together to provide a single NFC payment network for stores to begin offering a mobile payment facility to customers. The project has yet to receive formal approval, but once it does, it could provide a platform that could be rolled out across other countries.

Vodafone’s chief executive, Guy Lawrence, recently said: “The mobile phone has become the one item people really cannot be without… In the near future, people will start leaving their wallets at home.“. And Guy is absolutely right. Due to the fact that we can now do almost anything through our mobile phones, the devices are becoming an essential part of our lives. Thanks to Smartphone technology, we can now do practically anything through our phones. Given the randomness and novelty-factor of some of the apps we can download, using our phones for making payments seems a logical and useful function.

Google Wallet

Google Wallet logo

Always one to be at the forefront of technology, Google has already created its own version of a mobile phone payment system, called Google Wallet. It is a partnership with MasterCard and Citigroup, and it enables people with an Android Smartphone to make payments with their phones rather than with credit or debit cards. All this will be done on NFC enabled smartphones through a cloud computing system.

Google Wallet NFC

When in-store, users will simply be able to scan their device in front of a reader to pay for goods such as groceries, food and whatever else. This, Google says, will be how we will all pay for goods in the future.

Eric Schmidt, Google’s chief executive, recently said that “mobile banking is potentially a trillion dollar business.

Google Wallet can also sync the shopper’s Smartphone with its cloud system to integrate the app with other Google services, for example Offer and Shopper. These services offer Google Wallet users further incentives to go digital, such as discounts on goods with participating stores.