Digital Credit Cards

NOTE: This is a guest post by Hillary Jones. You can read more about this topic here and contact her per email. The reason I found this topic relevant for our readers is because I recently heard about the Barclaycard PayTag, which fascinates me as idea because it allows to turn every day objects into a mobile, contactless payment method. This is highly relevant for the Web of Things as detachable tags (and by extension thin electric circuits) offer a “digital skin” to common objects which makes them easily part of the Web.

E-wallet technologies may unburden wallets everywhere and eliminate the need for credit cards by placing purchasing power in digital transactions. Whether through NFC, GPS, or barcode images, smartphones are capable of cutting out credit cards for half the U.S. population. But this requires merchants and technology companies to collaborate.

Several companies are working on it. For example, Google Wallet transmits a user’s major credit and debit card information from a Near Field Communication (NFC)-enabled phone to merchants with NFC readers. Apple’s new iPhone 5 comes with the Passbook app, which allows participating vendors to scan the iPhone screen for stored membership cards, tickets, and coupons. Square‘s app connects through GPS to participating vendors once you’re within 100 feet of the vendor’s location. After you’ve selected your purchases, you simply tell the vendor your name and they charge the Square account associated with your card.

Each method of digital purchase has its pros and cons. While Square boasts no-wallet, no-phone purchasing, people may not be comfortable saying their name and walking out without seeing physical proof that a transaction occurred. Conversely, while NFC apps like Google Wallet require merely tapping your phone to a vendor’s NFC device, All Things D reports that mobile payments are mostly executed through Secure Element NFC, which stores your financial information in a secure location on your phone, and companies access that secure location when you make a purchase. However, NFC technology is not universal through phone manufacturers, retailers, and technology companies, and that’s impeding its mobile purchasing progress. Also, the iPhone 5 is not NFC-enabled, which may be a major loss for NFC technology and a gain for Square (which is iPhone-compatible).

At this point, all mobile purchasing options have a limited number of participating vendors. The ability of one digital wallet technology to endure over others may depend on the strength of their associated merchants. For example, Starbucks currently uses an app similar to Apple’s Passbook. Starbucks locations scan barcodes associated with the consumer’s account from their smartphone screens. But, according to the New York Times, soon Square and Starbucks will collaborate and offer Square’s GPS technology in all Starbucks locations. Starbucks has also invested $25 million in Square, and Howard D. Schultz, Starbuck’s chief executive, has joined Square’s board.

While digital purchases are growing in popularity, the U.S. is still hesitant. The New York Times reports that a Forrester survey estimates that only 30% of mobile phone owners in the U.S. are willing to use mobile payments, but that’s growing. The digital wallet’s success will depend on consumer comfort before any digital wallet technology becomes a primary means of purchasing.

What are your thoughts about the future of mobile payment technologies? Any company or product in this area that is ahead of the game? We’d love to purse this debate in the comments below.

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