Shopping with electronic money

5th Apr 2007 | 23:00

Shopping with electronic money

How your mobile phone will replace your wallet

If you've used an Oystercard on the London tube, you've used what is called Near Field Communications (NFC). You get the card near the reader rather than having to make physical contact.

Such contactless tickets or passes are common in Europe; key fobs, for example, open office doors across the UK. In Hong Kong you can use the same Octopus card to pay for bus, train and ferry journeys or to buy a cup of coffee or an ice cream when you get off the bus.

And anything that's small enough to build into something the size of a credit card can be built into a device you already own, a device you already carry with you every day - your phone.

In some surveys people claim they'd be more worried about leaving their phone at home than leaving their wallet behind; with NFC, your phone can be your wallet. It can be your train ticket, your library card, your supermarket loyalty card, your gym membership, your cinema ticket, even your credit card. According to Nokia's Gerhard Romen, "touch becomes the new click".

A wireless world

Take it a step further - anything you can touch, you can connect to. As Romen puts it, "touch provides an intuitive interaction between devices".

Microsoft has demonstrated NFC as a way of setting up a wireless connection between a media center PC and a smartphone. Nokia set up a smart bus stop that can tell your phone how long your bus will be. Romen suggests you'll be programming your phone as the key for your hotel room or tapping it on a digital picture frame to tell it to send a photo via Bluetooth.

To do any of that, though, we need NFC in more than just the one phone (the 6131) that Nokia has brought out so far, and we need operators and services to sign up. Analysts are predicting that by 2011 we'll have nearly 500 million NFC enabled phones and be spending $36 billion in contactless payments.

But Transport for London's has already tried and failed to turn Oystercard into more than a ticket service, because of political rather than technical issues. The banks are worried about losing margins, everyone wants someone else to pay for the infrastructure, retailers need convincing that there's money as well as customer convenience involved and mobile operators have to see a good reason to subsidise phones with NFC built in.

Thinking Orange

Orange thinks it has the answer and will be rolling out an NFC service: next year in France and "before the end of the decade" in the UK, according to Mung Ki Woo who heads up the team looking after payment and transaction services and contactless technologies at Orange.

The secret is convincing shops and services that NFC phones will make things cheaper for them and make customers spend more so that they pay Orange to run the service for them. Customers don't need any convincing, by the way: "consumers are just ecstatic, we get a fantastic response from consumers."

Orange wants to store cards and services in the SIM of your phone: it's secure and it's flexible. You can swap a SIM to your new phone to get the same services or have them downloaded automatically, and
Orange will lock services if your phone is lost or stolen.

"Consumers want freedom", says Mung Ki Woo. "Today I can use my leather wallet and I can put any card I want inside my wallet, I can put as many cards as I want (or as many as I can fit). Consumers asking for the same thing from their phones: I don't want my mobile limited to a single function.

"I also want some level of protection. I want to be sure that when I have impression of using a Barclays service on my phone that that it really is from Barclays. And I want a new application I install not to mess up the Transport for London application I already have, so we will exert some control, we will have some rules and we will enforce them."

Tickets that charge by the hour, discounts for buying tickets in advance or with another product, coupons that only go to the people a shop wants to target: there are plenty of options that could get you to open your wallet. It will take longer to persuade the banks to make your phone into your wallet though; Mung Ki woo says you're likely to have your Tesco clubcard on your phone long before you have your credit card there.

"Payment is probably a very attractive application but there are so many other attractive applications for NFC. Payment can be too complex to deploy as opposed to other services. Access control badges are really easy to deploy, as are tickets for transport: we could deploy NFC simply for ticketing. You don't need to become a bank to do it, you don't even need to discuss it with the banking community."

He says the UK banks are working on rolling out contactless payments themselves, and more local authorities are planning Oyster-style ticket systems, all of which could work with an NFC phone.

Mary Branscombe

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