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Once My Wallet Becomes a Smartphone, Who Needs VISA?

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Are you ready for your wallet to be replaced with your smartphone?  Technology is quickly moving towards the ability to use your smartphone instead of your old fashioned plastic credit card to pay at grocery stores, retail stores, and anywhere else you swipe your credit card. As we see the popularity of online and mobile payment systems increase, do we still need VISA & MasterCard?  They will change the foundation of their business or disappear.

How does the technology on your mobile device work? Your smartphone will use NFC technology to communicate with scanning devices installed in stores that allow you to “swipe” or “wave” your smartphone to pay for your purchase. All major platforms plan to pre-install the NFC chip in upcoming new mobile phones. Windows Phone plans to implement the technology next year, Apple is secretive as always but rumors elude to NFC in their iphone 5 or iphone 6 in 2012. Google’s Android should be launching phones with NFC pre-installed later this year. According to an article on Scifi.com, “Market tracker Juniper Research says one in every six mobile phone users will have a phone able to make mobile payments by 2014.” In a few years, your mobile device will be able to replace your wallet whether you like it or not.

The United States is several years behind Japan on implementation of mobile payment technology.  In fact, 1/5 of all smartphone users in Japan (where the technology was embraced years ago) are registered for mobile payment use. Starbucks started the trend in the US with their new payment app that allows consumers to use a pre-paid Starbucks mobile payment system to pay.

Mobile payment adoption in the US comes with a host of benefits and concerns to the consumer, one of the largest being security. The wallet to smartphone transition will increase demand for an enhanced level of security on smartphones, a feature that Americans rarely take advantage of.  With your bank account or payment information stored electronically on your smartphone, it is password protected and encrypted at all times. Does your wallet do that?

Recovering from a lost smartphone would be far easier than the painstaking hassle that comes after losing your wallet today. If I lose my iphone, I log on to apple’s remote iphone finder, lock or even remote wipe the phone, and presto, my data is safe. I don’t need to purchase new credit cards, and I can quickly and easily render the phone useless. Although it may seem daunting for one little device to carry so much valuable information, in a lot of ways it is far more secure than your paper and plastic-filled wallet.

Articles have popped up recently describing partnerships, feuds, and concerns over who will get future transaction fees should a mobile wallet concept take off. However, the major concern should be the glaringly obvious lack of need for the role VISA, Mastercard, AMEX, Discover, etc… currently play in daily transactions.  The mobile wallet concept eliminates the need for the middle man — I should be able to transfer money directly to the grocery store from my bank account via smartphone app to their payment-taking service.  Why would there be a need for VISA in the middle taking out a transaction fee?

As a business owner, I set up a merchant paypal account through my business bank account, linked it to my website, and encouraged customers to pay for their purchases online.  Many used their own paypal accounts or bank accounts to make payments, which were then automatically deposited (via FREE transfer) in to my business bank account.  Why can’t larger retailers adopt similar strategies?  Paypal already has a mobile payment system in place through their smartphone apps.  You can transfer money to a friend or a paypal merchant account.  Transaction fees only apply when credit or debit cards are involved, mostly due to the transaction fees paypal deals with from Visa or Mastercard.

I don’t see a need for the credit card giants in the future.  Technology has allowed us to complete a payment transaction with our bank account numbers securely hidden behind transaction hosts, who will reap the benefits of the transition. Google checkout, Paypal, and other large online payment processing companies will get a transaction fee, but they won’t need AMEX, Discover, or VISA involved at all, they’ve been cut out.

If VISA, MasterCard, Discover, and AMEX want to stay in the industry, they need to transform their host of transaction services to compete with Paypal, Google Checkout, iTunes, and others.  Otherwise, they will no longer be needed.

The largest drawback that I can see so far is that a dead cell phone battery or broken phone is suddenly financially crippling.  Your Droid dies and you can’t get groceries…

As an aside…since I’m looking at ditching my entire wallet to replace it with my existing smartphone, I’d like to ask my health insurance company why I still have to carry around a plastic health insurance card. How hard could THAT possibly be to transfer to an electronic version? It’s simple enough to scan your card to a PDF then store it on your mobile device.  However, since my doctor’s office still doesn’t even have email, I’m not sure how I’d let them make a copy of it…

A few references:

Mashable Why Your Smartphone Will Replace Your WAllet.

NY Times Swiping is the Easy Part

Baltimore Sun Mobile Wallets Coming Soon

The post Once My Wallet Becomes a Smartphone, Who Needs VISA? appeared first on Online Marketing.


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