Contactless Payments Could Drive Mobile Device Market

Carl Weinschenk

Carriers and device manufacturers search longingly for killer apps, and it seems that one is just about upon us. One of the next big things may be contactless payments, the ability to use a cell phone or similar handheld device to pay for products and services without actually having to break stride, stop and authorize the purchase.


In late June, according to this piece at Ars Technica, the Federal Reserve said a purchase of $15 doesn't even require a receipt. The piece, which for the most part is a discussion of the considerable security ramifications of contactless payments, suggests that the category will get a big boost by the new, lower limit.


Contactless payments (or electronic wallets) will have a big impact on mobile device vendors. Of course, there is no shortage of drivers of cell and smartphones. The ability to use a phone to buy a CD or some groceries without stopping could make the mobile device category even hotter than it is today. In a press release that hypes a recently released report, Javelin Strategy & Research suggests that chips in mobile devices will spur 30 million additional users during the next half-decade.


If that's so, it seems that contactless payments could become a major feature -- perhaps the major non-voice feature -- of mobile devices, not a handy add-on that some envision today. Moreover, in a mobile device environment characterized by its fragmentation -- there are dozens of features aimed at relatively small pockets of consumers and corporate users -- its seems that electronic payment capabilities could be a core function available in a high percentage of devices. It could be a valuable horizontal, not vertical, feature.


The compelling nature of contactless payments is a subtext of this feature on Nokia, which is actively researching the topic. The company recently participated in a trial with Visa, Mastercard and AT&T in New York City and near-field communications -- a key underlying technology for contactless payments -- is being widely tested. Indeed, this piece, which comments on a white paper from Atos Origin, suggests that contactless payments are an increasingly big deal in Europe.


Contactless payments -- the antecedents of which, by the way, are already widely used in EZPass and other "closed" systems -- could be a big deal because of their ubiquity. Unlike downloading music or video, using a cell or smartphone to pay for small purchases is something that will appeal to a huge number of people. Device makers know this, and certainly are working on the logistics and, of course, all-important security safeguards.

Add Comment      Leave a comment on this blog post
Oct 23, 2007 8:42 AM Salvatore D'Agostino Salvatore D'Agostino  says:
Nice post, you are on the mark that this becomes a widespread use case. This being said, I think you are short changing the extent of contactless payments. Simply its widespread in Europe and Asia. Its the basis of many mass transit electronic fare collection systems, been used at one particular brand of gas pump for some time. In fact they are pretty widespread. Take a look at the Smart Card Alliance we site for a number of publications. The move from contactless (a touch and go as opposed to swipe of a card) to NFC in a device is very simple technically and really does exist today for payments. Another area of interest is the use of the phone for physical access control (get through your door with your phone too). A lot of this revolves around being able to extend a device that mainly was concerned about authenticating to a network to being a source of strong authentication (put a digital certificate on the SIM and add a fingerprint sensor and voila) and flexible authorization depending on the applications it supports. Reply
Oct 7, 2008 3:33 AM smartass cards smartass cards  says:
I keep hearing that contactless is big in Asia but cannot find a lot of ionformation about it - is this the equivalent of 'our band is big in Europe'? Reply

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