After years of fits and starts, the prospect of using your phone to make purchases instead of your credit and debit cards is entering a promising era. The struggle for who will control your virtual wallet is intensifying, and while it’s far from certain what will replace plastic, it’s almost certain something will, very soon.
This isn’t about a gimmicky new way to separate you from your money. It’s about replacing credit and debit cards, and all of their vulnerabilities, with your phone. That phone will be linked to those same cards (and bank accounts), potentially enabling you to pay as you go without toting around cards or cash, and even without taking anything out of your pocket.
Within this revolution, there are two different technologies hoping to become the default. This time, instead of Betamax and VHS, we have NFC (Near Field Communication) and GPS (the same kind you use to navigate a map).
NFC backers – and there are plenty of them – are pushing a technology that sends payment information using radio waves from one device to another. GPS’s contingent is led by Square, a startup founded by Twitter inventor Jack Dorsey, and uses the location-awareness functionality of smartphones to establish a connection between you and a vendor.
This week, Starbucks announced it was partnering with Square, the best evidence yet that GPS might have an edge over NFC. For Starbucks, a $25 million investment in Square is pocket change, but the deal also puts visionary CEO Howard Schultz on the startup’s board and “Pay with Square” in every Starbucks, (eventually) letting caffeine addicts pay for their latte fixes with little more than a smile.