Major wireless firms aim to turn phones into electronic wallets

1/16/2011

DALLAS — For many people, smart phones are almost as indispensable as wallets. And soon, smart phones could replace wallets. A collection of the biggest wireless carriers, handset makers, and software developers are putting their weight behind a technology called near-field communication.

That standard will allow a cell phone to make a payment at a cash register, scan computer chips embedded in ads and posters for discounts and product info, and eventually incorporate driver's licenses and other forms of identification.

"This isn't just about payment," said Jaymee Johnson, director of strategic development at T-Mobile USA Inc. "It's fundamentally focused on transforming the ways customers shop, save, and pay."

T-Mobile, Verizon Wireless, and AT&T Inc. recently began a joint venture called Isis to standardize and promote near-field communication, or NFC, technology and applications.

It enables a variety of applications. For example, a retailer could embed paper-thin NFC chips in the price tags on its shelves.

When a phone with this technology is waved over the tag for, say, a digital camera, it directs the phone's Web browser to a site with more info about that camera. The tag could also wirelessly transfer a coupon for that camera to the phone.

Once the camera is taken to the register, there's no need to dig out a credit card or cash. The shopper can swipe the phone, which also contains credit card information, over the NFC-enabled register, which recognizes the coupon, applies the discount, and debits the bank account linked to the phone.

Voila, the digital wallet.

Another possible application is tapping the phone on a tagged movie poster to bring up the YouTube trailer to the film.

The tags could be easily, inexpensively, and invisibly embedded in magazines, for instance, to bring up videos or animations related to an article, or in the automobile stickers on a dealership's lot.

Near-field communication is similar to another short-range wireless technology that was heavily hyped a few years ago but then faded: radio frequency identification, or RFID.

Although it is used in a few niche consumer applications — highway-toll passes and a small percentage of credit and debit cards, for example — near-field communication is poised to flood the market.

If the wireless carriers have their way, widespread adoption of devices with the technology might take only a year or two.

Nokia has been supporting near-field communication for a few years, but the company's smart phones have limited market share in the United States. Now, a host of other manufacturers with big presences in America are about to jump in.

Although it will be months before major retailers start including near-field communication chips in their cash registers and displays, smart phones so equipped are already rolling out.

The first handset maker with a big U.S. presence to adopt the technology is Samsung Electronics Co. Ltd. It recently released the Android-powered Nexus S smart phone with a built-in reader. It's the first version of Android from Google Inc. to support the technology.

"We're open-sourcing the NFC software stack, and we've provided Android developers with [application programming interfaces] that will allow them to build applications that take advantage of NFC," a Google spokesman said.

To see how retailers might use the wireless chips, Google gave out near-field communication tags to retailers in Portland, Ore. Mr. Johnson at T-Mobile, who's also a spokesman for the new venture Isis, noted that the three carriers have more than 200 million customers among them.

Apple Inc., one of the biggest drivers in smart phone trends, is thought to be implementing near-field communication hardware in the next version of the iPhone. Such technology requires additional hardware in the phone, meaning older phones can't simply get a software upgrade to enable the capability.

But work-arounds exist.

Visa Inc., for example, is working on a standard with Bank of America Corp., JPMorgan Chase & Co., Wells Fargo & Co., and U.S. Bancorp to develop micro cards with built-in mobile payment capability that could be inserted into certain existing phones.

But pushing near-field communication into the hands of consumers is only half the battle.

The other half is persuading retailers to install the high-tech cash registers and networks needed to connect with these wireless wallets.

Mr. Johnson said Isis will piggyback on Discover Financial Services' payment network, which is accepted at more than 7 million locations nationwide. But a far smaller number accept so-called contactless payments.

Mr. Johnson acknowledged that rustling up retail support is critical to making near-field communication a success but said Isis is pitching the technology as not just a payment tool. It's also a way for companies to launch interactive loyalty and rewards programs for their customers, and get better, faster information on what products their customers want most.

So far, Isis has not announced any merchant partners, but Mr. Johnson said announcements will be coming in the first half of this year.

Near-field communication on handheld devices initially will focus on providing interactive information and mobile payment. But the technology could also allow documents such as driver's licenses and passports to be stored digitally on a phone.

"That is the next frontier," Mr. Johnson said.