Nicholas Pell
Dec 14, 2011

Near field communication technology, electronic wallets, and the future of digital transactions

In the future, you won’t crack open your wallet and pull out a card. This formerly cutting edge method of payment will fall by the wayside in favor of the latest in innovation, the digital wallet. Digital wallets will allow you to make payment easier, as well as manage your money better. They will also revolutionize the fields of commerce and identity.


A History of E-Wallets and Near Field Communication Technology


Digital wallets use both online banking and near field communication technology. Early innovators in the field of online banking allowed people to pay bills and make purchases without having to reach for a credit card. Around the same time, firms like Sony, Nokia and Philips began to seriously develop near field communication (NFC) technology. NFC is based on radio-frequency identification (RFID) and allows two access points to share information with another merely by being close to one another.


You might have used NFC to pay for gas at the pump or to add friends to your social network using your phone. Soon, or so the proponents of NFC claim, you’ll be able to pay for everything using NFC on your phone. One main difference between e-wallets and other payment services is that the e-wallet is tied directly to your bank account.


NFC and the Digital Wallet Today


Digital wallets face two obstacles: Getting the public to start using them and getting vendors to start accepting them. Still, the limited use today doesn’t seem to stop any of the major players from going headlong into developing e-wallets further. Visa and American Express are both pursuing the technology. Google and Amazon, big players in the world of commerce, but not finance, also offer e-wallets to their customers. Starbucks allows user to tap and pay with their smartphone using an app.


Digital Wallets and Patent Wars


E-wallets have also added fuel to digital patent wars.  The tech world was shocked when Verizon announced that Google Wallet, Google’s e-wallet app, would not be on Samsung Galaxy phones. Such phones use Google’s Android operating system. Apple is rumored to be adding an e-wallet into the mix in the coming months, as well. Sony Ericsson Mobile Communications and Verizon both have their own services in the works -- and don’t think that has nothing to do with the latter booting Google Wallet. With literally billions of dollars at stake and competition already high between the major players, look for things to hear up considerably.


E-Wallets and the Future of Innovation


Digital wallets offer convenient payment methods. They also come with potential pitfalls. Anyone who steals your phone can have direct access to your bank account, rather than just a credit card or two. Further, that national average credit card debt is high because it is a convenient form of payment isn’t a terribly controversial statement. Coming up with an even easier way to pay might only make matters worse, particularly if digital wallets are tied to a credit system.


The main advantage tapping has over using a credit card is speed. Not so much in producing the phone -- that seems about as fast as getting out a wallet. What consumers won’t have to do, however, is stand around waiting for the credit card machine to work its magic. Whether or not this will be enough to lure customers in remains to be seen. Otherwise, a carrot (incentives for consumers who use the device) and stick (making it increasingly difficult to pay other ways) might be necessary to get consumers to make the switch in large numbers.


Perhaps most interesting is the fact that your phone can now do yet another thing. The generation who can’t remember when a phone was only for making phone calls is rapidly growing. In the 21st Century, a phone call is the last thing people want to use their phone for. They expect the telephone to be a digital personal assistant, capable of performing just about any task they can imagine, and many they cannot. The digital wallet stands as an excellent example of the market leading the consumer, rather than the other way around. The question is trite, but the potential answers are not: “What’s next?”