Most mobile payment technologies are designed to turn the mobile phone into a virtual wallet, capable of authenticating users, accessing data, delivering bills, presenting customers with options and actually executing payments.
The following is a snapshot of some of the key technologies that turn mobile phones into payment machines.
NFC: Near Field Communication, a wireless communication standard that can transmit consumer and transaction data over short distances between handsets and payment terminals, is used in most mobile payment pilots.
There are drawbacks, however. The market for NFC-embedded handsets won't emerge for another year or so, and there's still no model that will allow for revenue sharing among telecoms, financial institutions and merchants, as well as provide operability among all phones and merchants, similar to credit and ATM cards.
MicroSD: MicroSD memory cards are inserted into a phone and typically host a prepaid account. The cards cost about $15, hold more memory than payment stickers, and are also attractive because they can download apps. However, they're considered a stopgap measure, so much so that even though ANZ in New Zealand recently completed a successful microSD trial, the bank announced shortly afterward that it's looking forward to other technologies to build out its full payments business.
Barcode: Barcode's an alternative to NFC, since the technology's already available on the iPhone and iPad Touch, and it's proven successful as a mobile payments enabler at Starbucks. However, most analysts say that barcode's use case is limited to larger retailers, and most trials are moving in the direction of NFC because NFC can support a wider range of payment functions.
SIM cards: A big part of securing NFC payments, "subscriber identity modules" place a circuit onto phone cards that stores a key used for authentication purposes. SIM's being used by ISIS for its payment trials in Austin and Utah, and is also getting tested overseas as part of a trial by DnB Nor, one of Norway's largest banks.
Intelligent Routing: Intelligent routing refers to the cloud-based controls that route payments to funding services. The desired benefit is to broaden the source of payments. For example, to execute mobile payments, Verizon's recently announced digital payments partnership with Payfone guides transactions to the proper funding source-either the consumer's phone bill or bank account-based on the consumer's mobile phone number and funding preference. "If you're on the way to a train station, you can go to Amtrak.com, see the schedule, then you push your phone number and click on 'Verizon Bill' and it goes to the process of checking out. Or if the funding source is a Chase account, then the user can enter that," says Rodger Desai, cofounder and CEO of Payfone.
Ultrasound: One of the latest alternatives to NFC is a downloadable app from Narette called Zoosh that allows contactless payments to be executed on any mobile phone, tablet, POS terminal, PC or television-regardless of whether or not those devices are NFC enabled. It's also one of the more interesting alternatives, since it enables mobile payments without forcing phones or terminals to be upgraded.
The carrot here is the lack of a chip or card that's inserted into the device-transactions are executed by holding a Zoosh-phone close to a reader or another phone. An ultrasonic pitch is produced that contains an encoded IT token that allows a consumer to make a payment after the token is recognized.
"A good rule of thumb is if you have an MP3 playback, your device can 'zoosh,'" says Brett Paulson, CEO and founder of Narette.
Zoosh is relatively new-it just become available in July-and Narette is a small firm, with only about a dozen employees. But it has attracted attention-PayPal mobile chief Laura Chambers supplied a canned quote for Zoosh's press announcement, extolling the technology's potential.
GPS: Using the mobile handset's positioning function to deliver real-time loyalty perks is a long-term goal of almost all mobile payments startups. Google hopes to make GPS part of its Wallet product, and U.S. Bank is planning a pilot for later in the year that matches coupons to customers' locations inside a retailer.
