The cashless society: essayists and futurists have been writing about it since the 1950s. Banks brought us one step closer in the 1960s with the introduction of the credit card, and another with the debit card two decades later. Now, some of the biggest names in technology, finance, and retail are unveiling a new concept that could bring us closer to the cashless era. It’s called the mobile wallet. Customers use smartphones instead of credit cards to pay at stores and restaurants.
Warner: “You’re probably looking at one of the most significant areas of growth over the next couple of decades.”
That’s Democratic Senator Mark Warner at a hearing held yesterday to brief lawmakers on this emerging technology.
Some financial research firms estimate that mobile payments could account for as much as half a trillion dollars in transactions just two years from now. Google, Apple, Walmart, AT&T, Visa, and Paypal are just a few of the companies chasing that market.
I decided to try a mobile wallet.
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I left my real wallet on my bed, pulled out my smartphone, and downloaded “Pay with Square,” the most popular and established application. It took about a minute to install, another minute to load up my credit card information, and then…much longer to find a place in Manhattan that would actually accept it.
AMBI: Bradford rejected
BB: “Can I pay with my phone?” Clerk: “No you can’t.” (5s)
That’s the kind of response I usually heard. After about a half hour, I found Prodigy Coffee in the West Village, using the app’s list of merchants.
AMBI: Bradford at Prodigy
[Post entering Prodigy, fade under narration, post back up for marked lines, and repeat through end of doc sound]
Clerk: “Hi!” BB:”Hey, how’s it going?”
The manager, Ali Horowitz greeted me as I walked up to the counter. I took out my phone. I was a little tentative.
BB: “If I get a uh small green tea, can I pay for it with my phone?” AH: “With Square? Yeah.” BB: “Okay, cool, let’s do that.”
The app used my phone’s GPS to determine that I was close to Prodigy Coffee. A button appeared on my screen to “open a tab”—I pushed it, and sent a signal over my phone’s Internet connection to Horowitz’s iPad behind the counter. My name popped up on her screen.
AH: “Benjamin. Bradford.” Ben: “That’s me.” AH: “Love it. Thank you!”
With a push of a button, I was 2 dollars poorer and one green tea happier. Horowitz says it’s as easy for merchants as it is for consumers.
Horowitz: Your name pops up, you just hit the picture, and then the other person will get an email saying Prodigy Coffee has charged their email account. (10s)
It may be easy, but not many people use the app. Over the past three months, Prodigy Coffee has had a grand total of about ten customers pay with their phones.
Adil Moussa is an expert on merchant payments for the consulting firm Aite Group. He says the big firms like Google, Walmart, and AT&T are developing different technologies with the same goal in mind: they hope to create the definitive mobile wallet…and to reap the profits.
Moussa: That one bank becomes top of wallet or top of mind, whenever you want to use—whenever you want to purchase something, you would think of that card or that device as the first thing you were going to use. (12s)
The winner would receive a cut of every transaction, as well as data about their users’ buying habits, and the potential for vast advertising revenue. But. There are a number of obstacles to widespread acceptance, and Moussa is skeptical you’ll be leaving your cash or credit cards at home anytime soon.
Moussa: Let’s face it. To get somebody to change their behavior and to trust the fact that they can actually put their information on a phone is not going to be easy. (12s)
The security of mobile wallets was the major topic of discussion at yesterday’s Senate hearing.
There’s also a chicken and egg problem. Consumers won’t adapt until retailers do, and vice-versa. Jen Brown is both—she uses Pay with Square personally, as well as to organize class events as a student at UCLA’s business school. She says she’s been able to use her mobile wallet less than ten times.
Brown: I mean, I probably use it most just by paying for tickets to myself at school where I’m both the merchant and the customer. (7s)
The technology has been slow to catch on in the U.S. Phone carriers, developers, and banks all want a cut of the profits, and they’ve been hindering rather than coordinating with each other. That may be changing.
In other countries—particularly Japan and South Korea—mobile wallets have been used for years. When the iPhone was introduced in 2007, Japan already had millions of cell phone transactions every month.
