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Cell Phone As Credit Card? Americans Are On Hold

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The New York Times

Published: January 28, 2009

Imagine technology that lets you pay for products by waving your cell phone over a reader.

The technology exists, and, in fact, people in Japan have been using it for the past five years to pay for everything from train tickets to groceries to candy in vending machines. In small-scale trials around the world, including in Atlanta, New York and the San Francisco Bay area, nearly everyone has liked using this form of payment.

In the United States, however, consumers won't soon be able to wave and pay with their cell phones: Myriad companies that must work together to give the technology to the masses have yet to agree on how to split the resulting revenue.

For such payments to work in the United States, cell phone manufacturers, carriers, financial institutions and retailers must play roles. There also must be some sort of intermediary that is trusted by both the financial institutions and the carriers to activate the virtual credit cards inside the phone.

The risk of fraud is small, said Kevin Fu, an assistant professor of computer science at the University of Massachusetts, Amherst, who in 2006 uncovered several security holes in credit cards that are waved rather than swiped. Credit card companies say these problems have been fixed.

Fu is more concerned about privacy. He says it may be possible to get personal information, such as a person's name, from credit card account data on a mobile phone.

It is almost certain that mobile-phone payments will come to the United States. After all, the technology promises something for everyone: Credit card companies would have a new way to attract and keep customers and would save money by no longer sending cards through the mail. Carriers would enjoy another source of revenue. Retailers would benefit from a faster checkout process, and may find that people buy more when they pay with their phones.

"People really do like it," said Key Pousttchi, head of the Wi-mobile research group at the University of Augsburg in Germany. "It is easy. It is convenient. It helps you."

Nonetheless, Pousttchi said, "it is completely possible nothing will happen in mobile payments in the next five years if everybody keeps thinking only about their own piece of the puzzle."

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