Smartphone versus wallet | Business| Economy and finance news from a German perspective | DW | 25.02.2013
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Smartphone versus wallet

If you want to write a text message, surf the Internet or simply make a phone call - none of this is a problem with a modern-day mobile phone. But the future devices of this type may even be able to replace your wallet.

If you want to believe technology experts, the sensual feeling of stashing currency notes in your wallet may soon be a thing of the past. Noncash payment systems will dominate our shopping in the not-too-distant future, they suggest, as companies around the world continue working on the electronic underpinnings that will make spending money easier.

Hotly tipped as a favorite payment system is one called m-payment, done with smartphones.

Key NFC technology


The mobile future of shopping

Already, cashless payment systems, such as Google Wallet and PayPal, enable customers to go shopping around the clock, around the world.

More technologically-advanced is a system called Near Field Communication (NFC). NFC is on the verge of revolutionizing cashless electronic payments as it promises to be simpler, faster and more secure.

NFC chips enable wireless communication between different gadgets, and once built into a smartphone, can be scanned with a laser. Customers just need to pass an electronic reader at the cashier to pay for their shopping. NFC chips may also be integrated in credit cards.

The market of mobile payment, which is also called m-commerce, is fiercely contested, as many companies want to be the first to come up with a commercial solution, thus setting the standard for the technology.

Manfred krüger

Manfred Krüger's firm banks on a mobil commerce breakthrough

Mobile payment is more than just a hip trend, said Manfred Krüger, chairman of ConCardis GmbH. The German firm specializes in cashless payment systems, and its chairman told DW that rapid growth in the use of smartphones and tablet PCs would create a growing demand for mobile payment. "Mobile phone technology will increasingly transform e-commerce into m-commerce," he said.

MyTaxiApp blazing the trail

MyTaxiApp is a software application already used by customers to pay taxi fares. One of them, is Andre Bajorat, a senior researcher in online-banking and mobile payment systems. Noting that he tended to lose his taxi receipts, Bajorat said that the smartphone app had been a great help to him.

"Now I get an e-mail with all the necessary receipts, which I can't lose anymore," he told DW. The app used PayPal or his credit card as the underlying payment system, Bajorat said, which made it virtually unnecessary for him to carry cash in a wallet around.

Bajorat said he saw potential for installing more of these so-called island solutions modeled on MyTaxiApp, since both retailers and customers had an interest in cashless payment. US-based coffee shop chain Starbucks already has such a system, he added, and cinemas as well as shopping malls were likely to follow soon as they recognized the benefits.

Data protection obstacle

German e-commerce lobby group, Bundesverband Informationswirtschaft, believes that it is just a matter of time until mobile payment systems will be introduced nationwide because NFC technology was on the verge of a breakthrough.

computer screen

Scanning mobile data is a gateway for criminals

However, protecting customer data is still a major and unresolved issue. In particular, the laser-based scanning technology in NFC has not emerged from its test phase yet.

"At the moment, the technology still has room for improvement as far as data security is concerned," Antje Stobbe, an analyst with Deutsche Bank, told DW. She criticized that NFC chips could be read by unauthorized people more easily than had previously been thought.

Japan leads the way

While Germans still appear to be somewhat reluctant to go cashless, alternative payment systems are more common in other countries. Japan, for example, has been using NFC-based ticketing in public transport for about a decade.

Noting that, in the past, Japanese subway turnstiles used to be heavily clogged during rush hour, Steffen von Blumroeder said the situation had substantially improved since the introduction of NFC-based payment procedures.

"Passengers no longer need to hold their tickets tup against the scaners since NFC chips are now automatically scanned while passing, making ticketing much faster," he told DW.

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