The future is already here , and it's being distributed at McDonald's.
In the world of mobile payments, the buzz is around a three-letter acronym: NFC.
Near-field communications represents a new standard that small devices can use to scan or transmit signals close-in. The details are still being hashed out among industry players but, in the next couple of years, it's expected to become commonplace in smart phones and cash registers.
You can, however, can get a glimpse of the future today. In Canada, Visa is already mailing out credit cards emblazoned with what looks like a little wifi symbol. It calls it PayWave, and it's an early implementation of NFC.
When you're standing at the till of a participating merchant – McDonald's is one – just tap your credit card to a reader like you would a fob key, and the payment goes through, without sliding, inserting or entering a PIN.
What can NFC do for me?
Today's implementations of NFC, like PayWave, implant passive tags inside credit cards, which NFC readers can scan and use as identification and proof that the card is legitimate.
The future that the payment-processing industry is looking forward to is one in which smart phones themselves are NFC-enabled, allowing them to communicate directly with point-of-sale terminals.
In that scenario, your smart phone would itself become an all-purpose wallet, supplanting the plastic you tote around today with a single device to wave at the scanner. Current trial versions involve loading up a payment app and entering a PIN number, but future implementations could vary.
When will it arrive?
By loose consensus, observers expect the technology to be mainstream within the next couple of years. But then, "soon" has been a common refrain for a while.
"For the last ten years or so, people have been saying it's in the next five years," says Juan Wee, the head of mobile business development at Samsung Canada.
That said, Mr. Wee says he thinks it's for real this time, with manufacturers like Samsung rolling out NFC-enabled products today, and active trials with major players like Google and MasterCard forging a path for others.
Why would people use it?
NFC makes a couple of promises. One is the convenience of a single way to pay for everything. Assuming that banks, merchants, carriers and other intermediaries all rally around a common standard, a smart phone could take the place of every card in your wallet.
Better still, the system could work with loyalty programs to eliminate the need to have those cards scanned before a purchase.
This is not to say that it's a slam-dunk. For more than a decade, electronic cash-replacement cards and fobs have been trialed, only to vanish into obscurity when consumers decided that coins and bills worked just fine for them.
"In my opinion, it's going to be more than the payment," says Ryan Stewart, a product manager at Beanstream, a Victoria-based payment processing company. "There has to be some value-add."
Why isn't it here yet?
While the technology is proven, a few major pieces still need to fall into place.
First, and most obvious, a hardware ecosystem needs to evolve. Merchants need to install terminal equipment, and smart phones themselves need to have NFC hardware built into them.
The first of these are already appearing on the market. Industry leader Samsung has introduced NFC on new up-market phones like the Nexus S. (Prior to Apple's latest iPhone launch, there was widespread speculation that the presumed iPhone 5 would come with NFC; the company has a history of pushing new technologies into the mainstream. The iPhone 4S it actually shipped didn't include NFC.)
But there are other, more prosaic issues at play – the kind that involve control and money.
Payment processing has traditionally been between merchants, credit card companies, and banks. However, mobile payments have added a new player to the mix: the cellphone carriers that keep mobile phones connected to the Internet.
"There's a little bit of friction between what the financial institutions want to do and what the carriers want to do," Mr. Wee says.
Specifically, he says, banks and carriers are wrangling over who will administer the secure technology that will identify customers – a potentially lucrative piece of business.
One of the most promising trials is currently underway in the United States: a service called Google Wallet is bringing consumers, merchants, financial institutions, cell carriers, and smart phone makers together in an integrated NFC payment system.
Its premise is simple: Load up the Google Wallet app, tap the terminal, enter your PIN, and the payment is made.
It's early days, but if the model is adopted, in a couple of years, stores could be alive with the sounds of smart phones – and not cash registers – ringing.
Nov. 7: A closer look at Google Wallet
Special to The Globe and Mail
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