TECH SPECIAL..PHONE WALLET

Many Competing Paths on Road to the Phone Wallet

The idea of using a smartphone as a wallet has been slow to catch on in the United States. A big part of the problem has been that most stores do not have the proper physical equipment to allow customers to pay by tapping their phone. These stores also do not have the right equipment to allow the use of smart cards, credit cards embedded with computer chips that are much less susceptible to fraud. But a change is coming that will push both innovations at the same time. Merchants are facing heavy pressure to upgrade their payment terminals to accept smart cards. Over the last several months, Visa, Discover and MasterCard have said that merchants that cannot accept these cards will be liable for any losses owing to fraud.

“Everybody is going to be upgrading,” said Jennifer Miles, an executive vice-president at Veri-Fone, which provides payment terminals to most merchants in the United States.

While updating the terminals for smart cards, VeriFone also plans to upgrade for smartphone wallets, providing the capability for near-field communication, the technology used by the Google and Isis wallets, the two biggest smartphone wallet projects. Before the credit card companies made their announcements, almost no merchants were buying terminals with smart card and NFC capabilities, Ms Miles said. As of January, though, VeriFone stopped installing terminals that did not have NFC readers. Moving to NFC is a windfall for VeriFone, considering that the new systems cost 10 to 30% more than standard ones.

It is also a boon for Google and Isis, a co-operative venture of AT&T, Verizon and T-Mobile. Google Wallet has been severely limited by a lack of N.F.C .-enabled merchants and phones. Isis, meanwhile is planning to start service later this year in only two cities, Austin, Tex., and Salt Lake City.

It picked Salt Lake City largely because its public transportation system had already installed NFC readers, said Ryan Hughes, the chief marketing officer at Isis.

“This was a gift, to be honest, that was sitting under our Christmas tree that we didn’t anticipate,” he said, of the recent moves by the credit card companies and VeriFone. Ms Miles of VeriFone now believes that NFC could be completely mainstream within five years. While that sounds speedy by some standards — she notes that debit cards took about four times that long to take hold — other companies pursuing mobile wallets are not willing to wait.

Square, a start-up founded by Jack Dorsey of Twitter, has gained a foothold among small merchants by distributing a free credit card swiper that attaches to a smartphone or tablet, allowing these swipers to serve as their own payment terminals.

 JOSHUA BRUSTEIN NYTNS ET120510