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NEW YORK -- Many companies are picking up on what has become commonplace in Japan -- the wallet cell phone. One convenience company, 7-Eleven, is implementing electronic card readers at some of its stores for Nokia phone users to use as a payment method.
The phone works as a contactless payment system, similar to a contactless credit card, where a chip is embedded in a device, and a reader uses radio waves to read the embedded information.
Several years ago, the technology as debuted in Japan. NTT DoCoMo, a Japanese wireless network, sold wallet phone services to more than 19 million, according to the report. The trend is growing as well. ABIresearch, Oyster Bay, N.Y.-based technology research firm, estimates that by 2011, wallet phones will make up 30 percent of the global cell phone market -- about 450 million handsets.
"Some markets are already taking off, and that gives us a good feeling that some of the forecasts will materialize," said Gerhard Romen, the head of development for phone maker Nokia.
Finland-based Nokia, the world's largest cell phone maker, is partnering with MasterCard to offer two cell phone payment services. One of them will be tested at 7-Eleven stores, the other, at Cingular Wireless and Citigroup.
Currently, another cell phone maker, Motorola, has three trials underway, one involving Discover. The pone marker is providing the phones and software, using Motorola's M-wallet program.
If the technology is a success, it could prove to be much more than contactless payments. The device has the ability to hold coupons, and loyalty program points, in addition to bill payments and online banking.
One customer, Frank Hernandez, a subscriber to the Discover program with Motorola, uses his cell phone as his payment option of choice. He uses the device at places where contactless payments are accepted, and said he probably buys more snacks at convenience stores now because of the wallet phone.
"It's very handy," he told the paper. "I use it all the time."
While the main benefit is speed, consumers could also use the phone in place of cash at retailers, the report stated.
However, the technology faces several hurdles, including security risks, phone theft and general acceptance. Only 8 percent of consumers in general said they would most likely use their cell phone for contactless payments over other contactless devices such as a credit card or key fob, according to a recent Javelin survey. This was not the case for younger generations. Nearly 20 percent of consumers in 18 to 24 year olds would do the same, the study found.
One of the biggest concerns mentioned during the survey was security. A significant number surveyed said they are not interested in contactless cards or phones because they seem less secure than traditional credit cards.
However, this is just a consumer perception, according to Javelin's Bruce Sundin. "It's a new technology adoption issue," he said. PIN numbers are required to access the account and consumers have no liability for credit card losses with the theft of a cell phone, he added.
In addition, restraint from retailers is another hurdle the technology faces. Merchants must be convinced the contactless terminals -- which cost about $100 to $200 per device -- are worth the investment, the report stated.