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What's in Your Wallet? Soon, Nothing

Credit cards are migrating to smartphones at rocket speed.

“What's in your wallet?” the ubiquitous Capital One commercial asks.

“Not much,” may be your answer by the end of next year. All those credit cards, loyalty cards, coupons and paper receipts will be on your smartphone instead.

A convergence of technologies, marketing, greed and social trends is rocketing this thing like you won't believe.

Tap or wave your phone on or by a pay terminal, type a four-digit PIN on the phone's screen and you're done. Coupon or loyalty card discounts taken. Digital receipt on its way to you.

Remember how quickly point-and-shoot cameras became a niche item, made obsolete by your phone? Digital wallets easily will happen in half that time.

PayPal, one of the early big players, estimated in December that it would handle $1.5 billion in mobile payments for 2011. In February, it upped the estimate to $2 billion. In June, it was hiked again to $3 billion.

In other words, it's growing so fast that even the guys in the middle of it all can't get a handle on it.

The tipping point came in May when Google announced it was teaming with MasterCard, Citi, FirstData and Sprint to launch its Google Wallet payment service.

The technology that allows this to happen, near field communication, or NFC, already was beginning to roll out and is likely to be included in every smartphone by the end of next year, including the iPhone. NFC chips are cheap, and the technology already is in use for various purposes worldwide.

While only one Google Android phone on the market, the Nexus S, currently has NFC capability, Google reportedly plans to enable older phones to use a limited version of NFC by offering credit-card specific NFC stickers that users can apply to the back of their phones. (NFC typically only requires one side of a communication to be electrically powered.)

Pay terminals that will work with NFC already are in thousands of stores nationwide, including dozens in San Diego County.

Google is rolling out its service beginning this summer, with trials in New York, San Francisco and Portland, Ore. Isis, a competing venture from AT&T, T-Mobile and Verizon, is launching next year in Salt Lake City and Austin, Texas.

Why the rush to change how we pay for things? I'd like to tell you it's because the good folks at Google think it's nifty.

They do think it's nifty, but that's because of the Google Offers service they announced at the same time as Wallet. Think Groupon and FourSquare on steroids. But for Offers to work well Google needs to know your shopping habits, which is where Wallet comes in.

Walk around the mall and up pops a coupon on your smartphone for an exclusive discount on men's Polo shorts at Macy's. Send it to your Google Wallet app and it's automatically applied at checkout.

Hey, wait a minute. How did Macy's know you were looking for men's shorts, and liked the Polo brand? Here's why: Because you bought a pair last summer at this time, or searched for shorts on Google, or are in the target demographic for Polo. And the GPS on your phone ratted out your presence at the mall.

Advertisers will pay a lot of money to reach you with just the right ad at just the right time to motivate you to walk through the door and plunk down money on the counter. Um, tap your phone at the pay terminal.

James Davis June 27, 2011 at 04:23 PM
This is going to be very big. I have been working on NFC for the past several years as its been around, technologically for quite some time. However the magic bullet has always been in a legitimate payment system that all carriers in the US could agree on. Japan has been using it for sometime for soda machines etc with Nokia devices. Dont forget that NFC will be working with everything it touches to share data. So while the payment system will undoubtedly be the most sought after feature, users will also be able to pair their phones with other devices for transferring photos, pairing with headsets....all with the tap of both devices and confirmation. As always, great write up Jeffrey

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