Despite bold moves on mobile payments, long haul ahead

Computerworld - Three of the largest U.S. wireless carriers and the companies behind Android and BlackBerry smartphones gave Near-Field Communications (NFC) for mobile payments a boost this week, announcing a joint venture to build a mobile commerce network in the next 18 months called ISIS.

Verizon Wireless, AT&T and T-Mobile will work with the fourth-largest credit card company, Discover Financial Services, and Barclaycard US, part of Barclays PLC, which will issue credit accounts. The wireless carriers have a combined subscriber base of more than 200 million customers.

ISIS will use NFC short-range wireless networking to let users make payments from their NFC-equipped phones when they are passed within about four inches of a reader.

NFC has been around since 2004 and is used most widely in Japan and Korea. But the carriers' endorsements of the technology don't mean that consumers in the U.S. will begin using smartphones or other mobile wireless devices anytime soon to pay for groceries, movies or subway rides, much less big-ticket items like $1,000 HDTVs.

"It will be many years before you see this [mobile payment] technology moving into the mainstream, although within a decade there will be significant volumes of users in the U.S. and more outside the U.S.," Bob Egan, a mobile payments analyst and founder of The Sepharim Group, told Computerworld.

Egan predicted that it will be decades before consumers move to paying for purchases over $25 with a wireless phone, preferring to use credit cards for major purchases.

Unlike in some parts of the world, where a mobile phone doubles as a person's wallet, the traditional payment options for people in the U.S. are abundant, added Jack Gold, an analyst at J.Gold Associates.

"Here in the U.S., we have so many options," Gold said. "Is there really any benefit to having things charged through my phone as a consumer? I already have three to four credit cards in my wallet, and using them is not really that hard. Do I really need another payment method? So I don't see mobile payments taking off very quickly."

Indeed, the biggest obstacle to mobile payment adoption could well be widespread user acceptance. With credit cards entrenched, analysts wondered whether consumers will trust U.S. cell phone companies, much less Google or Apple, to become de facto credit card companies.

"Compared to banks, mobile operators are clearly the Wild, Wild West," Egan said. "The reputation of banks today is obviously not very good [with the recession and bank bailouts], but you could say the same for the carriers."

Gold said he agrees that consumers will be skeptical of carriers' handling mobile payments. "Can I trust my carrier to get the billing right? Can I trust that no one will be able to scam my account or steal my identity? All those questions need to be addressed," he said.

OS, handset makers join party

Also this week, Google CEO Eric Schmidt showed an upcoming Android-based smartphone with an integrated NFC chip set and said the next version of Android, code-named Gingerbread, will support mobile payments when it surfaces in the next few weeks.