Hey, Your Wallet's Ringing

By Carlo Longino

Device convergence in the mobile world typically means something like shoehorning an MP3 player into a handset (sometimes with hilarious consequences). But plenty of companies have have designs on cramming your wallet into your cellphone, too.

Wireless payment systems aren't all that new. The most well-known example in the US is ExxonMobil's Speedpass, which uses a little plastic cylinder on a keychain — though it's also been built into some Timex watches. The cylinder holds a tiny radio transceiver, which a user waves in front of a gas pump or reader at a cash register; and the system then bills the purchase to an associated credit card. The system is simple and easy to use, but its biggest drawback is that it can only be used at ExxonMobil gas stations. If you pull into an Amoco, you re stuck with whipping out the old-fashioned Visa or Amex.

Speedpass, then, acts as little more than a credit card replacement at one chain of gas stations. It may be a marginally useful product, but its limitations illustrate two characteristics mobile payment systems must have to really succeed: high utility and wide usability.

In other words, they ve got to do more than just replace your credit card, and they should be accepted by more than just a handful of merchants.They must be useful, both as payment replacements, but with other applications, and they must be accepted at a wide number of places. That's part of the problem with Speedpass and other similar programs. While it's helpful for ExxonMobil customers, imagine carrying a separate key fob for each brand of gas station, convenience store and supermarket—your keys would be so cumbersome, they d require their own backpack. (Of course, some retailers view the payment systems as lock-in mechanisms, an attempt to get people to shop at their stores exclusively.)

Mobile payment systems are proliferating, but it's still the early days, and (in the US, at least) a viable one is yet to emerge. One attempt, MobileLime, launched this summer, taking a slightly low-tech approach: when users go to pay at a merchant that accepts it (currently about 45 places in Boston), the user calls an 1-800 number and enter the business ID number and a PIN. They then give the merchant the last 4 digits of their phone number which is entered into the system along with the price; the money is then deducted from a prepaid account, or billed to a credit card, which then deducts it from a prepaid account or bills it to a credit card. Not particularly convenient when compared to something you just wave in front of a reader that handles the rest.

All the major credit card companies are working on contactless payment systems, and they're looking at integrating them into phones as well. One Nokia-Mastercard trial put RFID chips into handset faceplates — basically putting the SpeedPass in the phone.

But these trials still don t deliver what s necessary for a truly successful mobile payment system. Credit cards aren't always the ideal mode of payment, particularly for very small transactions —exactly the kinds of transactions where mobile payments are most useful (think buying the morning paper, or a can of soda or pack of gum). But more importantly, credit cards generally can't be adapted for applications that would make them even more useful, like doubling as subway passes, or access control equipment.

Not surprisingly, we have to look to the East to see a better way. The FeliCa system, developed by Sony and first introduced in phones by NTT DoCoMo, has emerged as the country's mobile-phone payment standard; it s also been rolled out on handsets from the country's two other carriers, KDDI and Vodafone. FeliCa's base functionality is as a payment replacement system, where users fill an account with funds then debit purchases, or connect it to various brands of credit cards. Japan s mobile carriers also helped spread FeliCa s acceptance by smaller vendors by setting up a fund to help pay for point-of-sale equipment.

But what makes FeliCa really interesting is that it's not an application; it's a platform that lets other applications run on top of it. This means that companies and developers can write their own FeliCa functions that can be downloaded to compatible phones, constantly expanding its functionality. One of the most popular applications has been to make FeliCa phones work with the Suica contactless IC ticket system of the East Japan Railway Company around Tokyo, letting people use their phones as train passes and tickets.

One application that highlights FeliCa's usefulness as a platform is the Kesaka system. At its most basic level, a FeliCa phone can be used as a key to open a Kesaka lock. But the application on the phone lets the user remotely check if the lock is open, notifies users when the lock is unlocked, and lets them distribute "duplicate keys" to other people's phones. Those dupes can then be set to expire after a certain time, as an extra security precaution.

FeliCa phones can also serve as plane tickets, loyalty cards at stores, movie tickets, and, of course, change for Coke machines. All of this is possible because of the platform approach — nearly any type of transaction or situation where someone's identity is needed to be proven can be integrated into the platform, as long as a developer makes an application for it. FeliCa, then, is not only out to replace credit cards, but everything else in your wallet too.

Carlo Longino is a writer and analyst that follows the mobile industry. He’s co-editor of MobHappy, and also an analyst for Techdirt. He can be reached at

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