Future of money is in your pocket

Mobile phones will soon become our wallets. Anna Rose Kerr show us how mobile technology will change the way we pay for products and services.


The past

Over the last two years, there have been some major advancements in finance. Our client ASB Bank offers banking via mobile, as well as Facebook. The trend worldwide is for banks to offer basic services like account information, transactions and payments within a mobile app.

Other financial apps offer some competition with the biggest threat to banks being Google Wallet. This application uses the NFC chip in some Android phones to make your phone work like a Mastercard credit card.

Many retailers are beginning to offer mobile apps for their loyalty programs and even payment. The best known example of this is the Starbucks app that allows you to pay with a barcode on your phone.

Late last year, a guy called Jonathan Stark put a screenshot of his Starbucks barcode up on his blog as a social experiment. Within 30 minutes, the $50 he loaded onto his account was completely gone. The next day, Stark noticed something odd. His account now had more money than before. People were actually topping up the account so other strangers could use it to buy coffees. Within a week, about US$19,000 went through his card via the thousands of people who saved the screenshot on their phones.

During his SXSW talk, Stark shared some amazing stories about how the Starbucks card brought out the best in human behaviour. People would go through Starbucks drive-thrus in the morning and use the account to pay for their coffee and the person behind them. That person would in turn pay for the person behind them and so on creating a wave of goodwill that could flow on for hours. All because of an app that lets yuppies buy caramel frappes with their mobile phones.

Stark shared a great many lessons from this experiment, but the one which stuck for me was that people are happy to pay for things using their phones. With hundreds of thousands of people involved, only one single person contacted him to ask if it was secure.


The present

Currently, it is possible to use major credit and debit cards online and some merchants allow Internet cheques, although this isn’t very efficient. This is reasonably secure. In fact, more physical credit cards are stolen in real life than numbers stolen online.

Some Android phones have NFC (near field communication) chips which allow the phones to be used as credit cards for payments while on the go. Having a mobile wallet is more secure than physical cash or cards. When you pay a bill by handing your credit card to a waiter, you are taking a much bigger risk than having this information on a chip on your phone. Because not everyone has access to NFC yet, there are other mobile payment solutions available that use data connections and/or barcodes to work on a range of smartphone devices.

During SXSW, an app called ISIS was launched as the official mobile payments partner for the conference.

While there are several big players, we still have a long way to go for online payments to work seamlessly online. Part of the reason for this is that Paypal and Google Checkout are still reasonably hard to set up. There currently isn’t any universal payment system available that would allow companies to innovate or build on without an extensive back end. This leaves some opportunity for smaller players, like Strike, to come in and help smaller merchants to sell online.


The future

During SXSW, I heard different opinions of when mobile payments would reach the mainstream. A representative from Paypal said it would be at least five years, while the new players in the market seem to be more optimistic with two to three years. A study by Jupiter predicts that by 2015, most US consumers will be using our phone alone to pay for most things.

It is expected that developing nations like India, China and countries in East Africa may get these services faster because the need for them is much greater. It will be hard for VISA and Mastercard to keep up with trends because they are too accountable to shareholders. A startup that has the option to fail a bit before succeeding is more likely to make a breakthrough with this kind of technology.

It’s hard to say when New Zealand will catch up. We are known for our financial innovations, like being the test case for Eftpos. But we cannot be completely reliant on our banks to bring the future to us and we also need the technology to catch up. We are seeing an increase in smartphone sales and this is a good sign.


This post is originally publish on Droga5’s blog.

Editor in Chief at here SMNZ, I have a passion for social and digital media. When not writing and managing SMNZ I am the Head of Innovation at TAG The Agency, a digital ad agency and the Head of Sales and Marketing for End-Game, a software development agency. I'm also involved with a number of startups and I am always keen to support those that are bold enough to give things a go. Start something, better to try than to live wondering what if...