Cash, credit or a big smile?

November 17, 2011

We do everything with our smartphones now: reading, writing, photography, music. And, to paraphrase that old American Express commercial, we never leave home without it. But the one smartphone function that hasn’t exactly exploded yet — and really should have already — is paying for things.

The idea of an e-wallet isn’t especially new, but it did take the advent of the iPhone four years ago to bubble up the sort of possibilities that didn’t depend on storing information in a SIM card (which isn’t the prevalent wireless technology in the United States anyway). PayPal pioneered the notion that you could use a pocket electronic device you always carried to pay a restaurant bill or for a latte from Starbucks. (Sure, the device was a Palm Pilot, which means nothing to most 20-somethings. And yes, PayPal in its infinite wisdom stopped the person-to-person payment functionality very early in their history.)

That’s how far we’ve come — and haven’t.

One of the problems about dumping payment and loyalty cards is that the established credit card players are very well entrenched. Part is a visceral reluctance to believe that using your phone to store and convey payment and bank account information is much safer than brandishing plastic cards with an electronic strip.

This year has seen lots of movement in the credit card disruption space and next year significant numbers of people might finally be emptying their wallets and purses of all sorts of payment and loyalty cards.

Google has made a big bet on mobile payments, backing a technology called “Near Field Communication” which, in a nutshell, allows you to pay for something if you (and your phone) are near an NFC reader — no need to fumble for your card. But NFC requires special hardware, and so far there is exactly one Google Wallet phone. But Google purchased Motorola Mobility this year, so look for every Motorola mobile phone to be NFC-enabled.

With the market share for Android-powered mobile devices now exceeding 50 percent, Google is well on its way to creating a perfect storm to collaborate with those entrenched credit card companies — so far, just MasterCard — and make NFC mainstream.

On the other hand, Apple saw it fit not to include NFC in the just-released iPhone 4S and while Android is the world’s most popular mobile phone software — it’s on dozens of handsets — the iPhone is the world’s most popular mobile phone.

It almost feels as if NFC is doomed before it gets a real shot. That’s the way it is in tech sometimes: if a solid disruptive idea doesn’t catch fire soon enough it will get overtaken by a faster mover on some unseen horizon. Palm made the best electronic portable personal organizing tool imaginable, but they were too slow to make them all wireless. That left Palm vulnerable to the wireless phone crowd, which attacked from the other direction by developing nifty phones and then adding in the nifty things Palm offered while Palm struggled and failed to design phones to port their lead into a new paradigm.

In mobile payments, the new visionary is Square, the startup founded by Jack Dorsey, one of the co-founders of Twitter (and the guy who actually thought up the idea). Lots of brilliant entrepreneurs try for as big a second act as their first and few succeed, but Square seems to be on track, clearing some $11 million in transactions every day.

Square was already on to something by turning iPads and even iPhones into cash registers with a simple card reader that plugged into the device’s earphone jack. This meant that literally anyone could immediately accept a credit card without dealing with American Express, Visa, Mastercard, Discover or any other behemoth directly. Yard sales, flea markets, coffee runs suddenly became places where “cash only” was a thing of the past.

Then, this month, Square pushed the envelope even more by becoming NFC-like without the infrastructure and hardware complexities. With the Card Case app you can walk into a participating vendor and be recognized as a “regular” even on your first visit — getting served and walking out without producing anything at all to pay your tab. That’s because the shop will see you pop up on their app when you walk into their hotspot, and see that you’ve pre-installed payment information in your app and agreed to pay that way.

The possibilities here are limitless. Retailers will have firm numbers on who a regular is, or isn’t, and what their customers actually buy — in real-time. Store greeters will no longer have to pretend to recognize their repeat customers. Instead, they’ll be able to say: “Nice to see you again, Mr. Smith. May I fix you an Americano while I get you those those AeroPress filter refills?” Customers will be able to pre-order, at a multitude of participating establishments within a single app, swing by, pick up their goods and be on their merry way without so much as reaching into their pocket. In a piece I wrote what seems like ages ago about FourSquare, I said that the Holy Grail of geo-location check in would be if I could use that service to check in to an establishment and have a martini waiting for me as I was being seated. Square’s Card Case does that even better. All I have to do is walk in.

The only problem I see is how to choreograph the delicate matter of fighting a dinner companion over the privilege of paying the table’s bill. It is a gentle art, not easily learned, to convincingly reach for your wallet while deftly pushing aside your companion’s attempts to engage the server.

How do you win this gentlemanly scuffle when the fight isn’t about parrying a thrust of cash or credit but blocking packets sent over an IP network?

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The 1% are fiddling with their smart phones while America collapses.

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