Telecommunications, Automotive and Market Research

More than 15 years in the mobile telecommunications industry and an industry analyst since 1998.

Thursday, October 28, 2010

More smartphones means more online shopping... once the payment schemes are ready

We love our smartphones and the one thing they're able to provide is a more computer-like internet experience.  We can read news, check email, view video, and go shopping.  Sure, we can shop all day, but can we pay for the items we want?

Well, that's been difficult. For most of us, the default payment method for online purchases has been a credit card.  Sometimes we can make purchases from places where we have our credit card information stored but in other cases we want something from a new vendor. So you're stuck entering name, address, shipping information and credit card numbers time and again... not as easy as when we're typing on a full-sized keyboard.

That's where mobile payments come in.  There are several approaches and a couple are actually being launched in the US.

The biggest and most successful deployment of mobile payments is in Japan, where all the mobile operators are using something called osaifu-keitei (wallet phone). A chip in the handset allows users to wave their phone near receivers on vending machines, in convenience stores and to pay subway fares. It works well, but there are a million reasons that success won't necessarily be replicated outside Japan. (The chip technology is called "Near Field Communication" or NFC).

In the US, both Sprint and AT&T announced their own versions of mobile payments.

AT&T, working with several vendors, is focusing on digital goods you can buy with your phone... downloaded music, games and other content you use on your phone.  The charges would show up on your mobile phone bill.

Sprint's approach, called Mobile Wallet, is a bit more inclusive.  Its downloadable application (from partner Cardinal Commerce) sets up a place to store credit card data that is then accessible through a PIN. When you find an item you want to purchase online from a vendor that participates in Cardinal Commerce or Sprint Mobile Wallet, you can complete the transaction by just entering your PIN.

Both methods have limitations... with AT&T, you're buying digital goods. With Sprint, you can only use it at participating merchants. However, both are good first steps. The market potential is there and, I believe, the cellphone could replace the leather wallet in the near future. We'll keep an eye on mobile payments in this blog as well.


  1. why wouldn't NFC work outside of Japan? I mean there are reasons that I can think of, but as someone in the field, I'd like to know your reasons.

  2. It's not that it won't, but that it's not likely that all the companies that will need to agree on the technology and support will actually do so.

    There was an amazing amount of cooperation and investment required to make it work there. It's hard to envision everybody actually getting along for long enough to accomplish that in the US