It's called NFC, for near-field communications, and it's a technology that promises to revolutionize the way we pay for things.
Roughly translated: bye bye, wallet.
The Wall Street Journal reports this morning that tech titan Google, the company behind the operating system of Android smartphones, is teaming up with payment processing giant MasterCard and megabank Citigroup to embed the tech in Android devices that would allow regular folks to make purchases by waving their phones in front of a reader at checkout.
In many ways, it's a logical extension of the radio frequency tags that some consumers have used for years to pay for gas and other goods.
But, a major question arises from such news: who will control your electronic wallet?
Reporters Amir Efrati and Robin Sidel do a nice job explaining the implications for each company. Among them, the use of valuable personal data associated with the funds to get a better picture of the consumer.
- Google wants to make mobile payments easier to boost its lucrative online advertising business.
- Citigroup gets a latest-and-greatest feature to use as a competitive differentiator against other national banks.
- MasterCard gets an exclusive -- at least for now -- crack at half of all smartphone users in the U.S., and potentially many more abroad.
The report indicates that the project is "in its early stages," but it's in a way, inevitable. The financial sector -- particularly retail banking -- has welcomed advanced technology with open arms as a way to stay ahead in the arms race to attract consumers.
(Exhibit A: Chase or Bank of America commercials advertising the ability to digitally deposit a personal check at an ATM. Exhibit B: USAA's use of smartphones to photograph a check for digital deposit.)
The value proposition for consumers, of course, is to be able to pay for things more easily and receive advertisements (or discounts) that are more relevant to their purchasing habits.
On the security side, VeriFone Systems will handle the credit-card readers that will be installed at cash registers. (I wonder if they'll be the same scanners that can already handle credit cards with RFID chips embedded in them.)
Proponents quoted in the article say that NFC tech is more secure from identity thieves because it's digitally reinforced and there's no contact. But, as with all Internet ventures, privacy concerns about targeted ads remain.
The bottom line is that mobile payments are big business -- no doubt PayPal would agree -- and all companies involved want to grease the skids of commerce.
According to the report:
The market for mobile payments is expected to grow significantly in the next several years, reaching $618 billion by 2016, according to a report by consulting firm Edgar, Dunn & Co. and sponsored by MasterCard.
A report issued this month by the Federal Reserve cited industry estimates that there were 70 million contact-less devices, including credit and debit cards, and 150,000 contact-less readers installed by merchants in the U.S.
The question, ominously, is whether you'll have to consider Visa, MasterCard, Discover or American Express the next time you buy a new smartphone.