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NFC Turns Cell Phones into Money

Written By Brian Hicks

Posted July 26, 2007

At the ripe old age of 43, the fact that I’m a living and breathing anachronism is something that is kind of hard for me to admit. But every time that I check out of any store these days I am reminded of how out of step with the rest of the world I really am.

That’s because without fail these days nearly everyone but me seems to be using bank cards for practically everything that they buy–even for something as small as a Big Gulp. It kind of drives me crazy.

And to be honest I just don’t understand it at all. Why anyone would want to turn over their freedom to a machine is just simply beyond me.

Because that’s ultimately what electronic money means to everyone that uses it. After all, no one buys anything with a card until it is approved by the machine.

And while that may be OK for most people because it’s just so darn convenient, that’s just too a big of a leap of faith for me, and it always will be. Your money and your freedom go hand in hand.

That’s why in my world cash will always be king, no matter what happens.

But despite my all of my "old school" thinking on the matter, it’s clear to me, from the habits of a much younger generation, that electronic money is absolutely the wave of the future. So that makes it a trend to be reckoned with–for a profit, of course.

In fact, a recent trend in cell phone design may allow future generations to ditch their cash-filled wallets altogether.

It’s called Near Field Communications (NFC), and it’s an advance in transaction technology that will push cash even further to the back burner.

In short, it works by transforming any cell phone into the equivalent of a bank card. But instead of having to slide you card through a reader, NFC technology will allow you to make payment by simply waving your cell phone over the terminal. All of the banking information is transmitted wirelessly and without contact.

Pilot projects using the new technology have been underway worldwide for some time now, and the results have been promising.

In fact, based on these projects, ABI Research forecasts that by 2012 some 292 million handsets–just over 20 percent of the global mobile handset market–will ship with built-in NFC capabilities. That’s a lot of Big Gulps.

"NFC in mobile phones promises a quicker and easier way to execute a host of key tasks by just waving the phone," says ABI senior analyst Jonathan Collins. "Making payments, unlocking doors, downloading content, even setting up wireless networks and many other applications, can all be enabled from an NFC handset."

On top of that, a recent report by Juniper Research forecasts that NFC-enabled mPayments (mobile payments) will generate transactions worth approximately $22 billion by 2011 as the new technology really takes hold.

Says report author Alan Goode, "The technology is available now to enable secure and fast payments to be initiated on the mobile phone. The business model needs some work but there are positive signals emanating from the industry that will create considerable revenue for all parts of the ecosystem."

Parts of that ecosystem, naturally, are the carriers like Verizon, who are now lining up to take their slice of the growing mPayment pie.

A month ago the telecom giant announced that it was launching a new fee-based service called Obopay. The new service will allow its users to receive, send, and spend money using their mobile phones. That could translate into big business for the company and its peers as they reap the benefits traditionally banked on by the credit card companies.

That’s why, according telecom industry analyst Jeff Kagan, "We will see more carriers pay more attention to this as the year unfolds."

"The wireless industry finally is getting very interesting," says Kagan, "moving beyond phones to camera, video, television, movies and now, wallets.

Not surprisingly, that view is also held by Verizon CEO Ivan Seidenberg. In a recent address, Seidenberg remarked, "We used to say you needed three things when you leave your house: your cell phone, car keys, and wallet. Soon you’ll only need your cell phone."

Now there’s a scary thought if I ever heard one.

By the Way . . . In an otherwise down day for the market, shares of Apple jumped over 6% to open the day’s session. The Cupertino, California-based company beat the Street as its 3Q profit jumped 70% to 92 cents a share. That outright crushed the analysts as it beat expectations by a whopping 20 cents.

But it had very little to do with iPhone sales, which have been less then advertised. Sales of Mac computers jumped 33% from a year ago, while iPod sales grew 21%.

Steve Jobs is the man.

Wishing you happiness, health, and wealth,


Steve Christ, Editor

P.S. If you really want to learn about the ins and outs of the "cashless" society, Sam Hopkins is the guy to be reading. In fact, as a guy who came after the baby boom, he has been on to this trend for some time now. You can read more about it here.