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When a Smartphone Becomes a Wallet

They won't go mainstream for a few years, but mobile wallets are finally starting to pick up steam in the U.S.

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The future of your wallet. Image courtesy of Flickr user feuilllu

I think my wallet’s depressed. Not that it’s said anything, but when you’ve been with something for so long, you know these things.

Can’t say that I blame it. Remember how when you wanted to show off pictures of your kids, you always reached for your wallet. Now you go straight to your cell phone. There are tons of photos there—along with emails, text messages, videos, games. The closest thing I ever came to playing a game with my wallet was Find the AAA Card and as I remember, it wasn’t that much fun.

And now, the unkindest cut: Mobile wallets which use a technology called Near Field Communication to turn smart phones into payment cards. Once we’re swiping our phones to pay for everything and we no longer need cash or credit cards, it’s pretty much game over for our folding leather friends.

Fortunately for them, that may be awhile. Yes, we’ve been hearing for years about the Japanese and Koreans buying everything from gum to gas with their phones. And here in the United States, there was much hoopla last summer around the launch of Google Wallet, the search giant’s plunge into the mobile payment business.

But a lot of hurdles have to be cleared before mobile wallets go mainstream. For instance, just this week word leaked out that Verizon is keeping the Google Wallet app out of the Samsung Galaxy Nexus, the next big Android smartphone, which is expected to roll out in stores tomorrow. Verizon says it’s a hardware integration issue, but others have speculated that it has something to do with the fact that Verizon, along with AT&T and T-Mobile, have formed a joint venture that will launch its own mobile wallet, called Isis, next year.

There are a lot of potential players who want a piece of this action. Big players—the major wireless carriers, digital heavyweights such as Google and Apple, and credit card giants like Visa, which is rolling out its own mobile wallet called V.me next year.  And at least for awhile, they’ll all want to do it their way.

Then there’s the matter of getting retailers to invest in the devices needed to read the mobile wallet chip. Why bother when swiping credit cards is working just fine? Eventually, though, businesses are likely to see how much mobile buying will enable them to learn about a person’s preferences, which, in turn, will allow them to personalize promotions and coupons to individual customers’ phones–something McDonald’s has been doing in Japan for more than a year now.

And then there’s us. We’d have to get over our nervousness about security. And we’ll also have to be convinced that it’s really more convenient or cost effective to use our phone instead of a credit card. That’s where loyalty programs come in, but ones in which your phone can determine, in real time, when you’ve qualified for a reward of free merchandise or an instant coupon.

But like I said, this could take some time, much as it did with ATMs. Even in Japan, mobile wallets are not quite mainstream.

So for now, hold on to your wallet, the real one.  And occasionally pretend to lose it.  You know, for old time’s sake.

And a venti latte for my phone

One U.S. business, though, has already gone all in on mobile wallets. Starbucks has had its own mobile payment app for about two years and it went national with it last January. Since then, 26 million Starbucks transactions have been through smartphones, with the rate now at about 3 million a month, roughly double what it was last winter.

No big surprises on where Starbucks’ mobile wallet business is booming: New York, Seattle, San Francisco, Chicago and San Jose, in the heart of Silicon Valley.

Here are other recent advances in the mobile payment biz:

Video Bonus: For a taste of mobile wallet shopping at the cutting edge, check out this Tesco video of its virtual grocery store in a South Korean subway station.  You can shop while you wait for a train by taking pictures of QR codes on photos of food.

Today’s question: What would it take for you to switch to a mobile wallet?

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