Using Mobile phones as credit cards

Here’s an interesting stat- it was estimated that by the end of 2009, there were about 4.6 billion mobile cellular subscriptions worldwide. So to use these devices for transactions seems a natural! Japan, Denmark and other countries have been doing this for some time, and now the North American market seems especially ripe.

Using your mobile phone to pay for purchases is becoming more of a reality thanks to the efforts of eBay, Google and others. Earlier this year, eBay introduced two new iPhone applications, designed to make sellers’ lives easier when it comes to listing items from their Apple phones. The company claims its primary iPhone app, which is available in more than 190 countries and eight languages, has been downloaded 8 million times to date, and that 1 item is purchased using eBay mobile every 2 seconds. They estimate $1.5 billion worth of goods will be sold via mobile phones in 2010.

Here are just three examples. Consumers with a mobile phone can locate the nearest Starbuck’s, browse the available coffees, build a drink to be picked up on arrival, and pay using a Starbuck’s card on the phone. Whole Foods Markets customers puzzled by the use of an ingredient can use their phones to find and display recipes using that ingredient and even restrict their choices to cater to special food allergies or requirements, such as gluten or lactose intolerance. In Denmark, consumers can reserve seats on a train, purchase their tickets, and use those tickets to board the train while carrying nothing but their phones. Thanks to location-based technology and e-transaction billing, your cell phone becomes a ‘credit-swipe’ device.

Companies see synergies with other technologies too. Payment by phone can be combined with additional services to increase sales, speed up transaction times, and strengthen customer loyalties. Sales can close more quickly when shoppers looking at a product can access product information and reviews (for example, using their phones to read a bar code) and then pay for the product on the spot. Consumers using mobile phones as a payment method enjoy the convenience and security of not having to carry cash or a card.

Google recently announced that it is testing a Near Field Communication (NFC) chip that Google believes will redefine how we think about location. With the NFC chip and Android’s new Gingerbread operating system, mobile device users will be able to tap a physical map point — the now-iconic Google Places point — to pay with their mobile device in lieu of credit cards or cash. Google’s CEO Schmidt believes that NFC chips will go a long to advance mobile payments as the industry believes the technology will help minimize fraud. Combining ‘location’ with electronic purchasing, it’s possible to get product information by just ‘walking down the street’.

For sure, it’s getting quite exciting!