Credit Card of the Future-Your Cell Phone?

By Eva Maria Norlyk

Cell phones have evolved into such an inseparable part of our lives, one sometimes wonders if babies of the future will be born with a cell phone attached. Cell phones have proven to be not just a great way to keep in touch with family and friends, they have morphed into multi-faceted thingamajigs, complete with cameras, digital camcorders, e-mail reception, and in if you want, full internet access.

In a world where the iPhone can now double as a musical wind instrument (the Ocarina application), it was only a matter of time before your cell phone would take over yet another vital part of your life: Your credit cards.

Increasingly popular in South Korea and Japan, cell phones capable of making electronic payments double as credit cards, IDs, public transportation passes, and more. A hotel in New Zealand has even installed new room locks that respond to a signal from guests’ mobile phone. An estimated 73 million people worldwide today use mobile payments, and that number is projected to rise to 190 million by 2012.

The technology used is the same that of no-swipe credit cards, which use radio frequencies to relay credit card data, eliminating the slow and cumbersome process of swiping the card and signing the receipt. The new technology enables consumers to load bank and credit card information onto their cell phones and in turn scan the cell phone like they would a no-swipe credit card, when making purchases at stores set up to read the radio frequency.

The idea has caught on in Asia as a way to simplify life, replacing the need to carry around a wallet with credit cards, cash, ID’s, and more. It remains to be seen whether or not it will catch on in the U.S., however. The idea was tested in the U.S. in the late 1990s and early 2000s, when a group of consumers were given the ability to use their phones to make payments and access public transit. At the time, the idea didn’t really catch fire, however, that was ten years ago, before cell phone apps started to seriously catch on. Some industry observers now expect cell phones in the U.S. to be able to make credit card payments within five years.

While combining ID, credit card, and cell phone into one product seems like a great idea, many consumers concerned about credit card security might worry that mobile phones loaded with credit card and personal information might be a dream come true for fraudsters and identity thieves. Banking institutions and phone companies argue that the technology is perfectly safe. Yet it’s unclear if consumers will feel assured enough to create sufficient demand for the new technology.

Nonetheless, with an estimated 4 billion mobile phone subscriptions worldwide (an average of two subscriptions to every three people), there is no doubt that cell phones rule. And with our ever-present penchant for streamlining and simplifying life’s little tedious tasks, it may only be a matter of time before cell phones replace the need for carrying around wallets.

Published: November 29, 2009