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Mobile Phone ‘Wallets’ Will Takeoff in 2012

Posted on: Friday, 16 May 2008, 05:05 CDT

Researchers from Strategy Analytics and ABI research predict that by 2012 one in five mobile phones will come equipped with new technology enabling small payments to be made by simply flashing the handset.

The technology would allow consumers to use their phone as an access card or a wallet by merely waving it over a wireless reader and in some cases entering a pin number into the phone. Travelers in Tokyo and London are already using the technology to access public transport, and Nokia has introduced four new products based on the technology, however the high price has slowed down its widespread adoption.

"When the 20 percent level is reached it starts to feed itself. That is the critical point," said Jukka Suikkanen, TeliaSonera’s R&D manager, during an industry seminar in Helsinki. TeliaSonera is Norway’s top telecommunications provider.

Mikko Saarisalo, a technology manager for Nokia, declined comment on the outlook for the technology, but noted that 30 percent of mobile phones were text message enabled before the service took off.

ABI Research predicts 6.5 million NFC (Near Field Communication) phones will be sold this year, a one thousand percent increase from 2007. But this growth is held back by high prices due to the extra processor needed in the phones to provide additional data security.

For example, in Finland, Nokia's 6131 model sells for 139 euros, the NFC version of the same phone sells for an additional 100 euros.

Suikkanen said the higher prices will likely begin falling some time next year as operators add security features to SIM cards, which would eliminate the need for an extra chip. Last month, Strategy Analytics said that NFC will likely remain limited to trials this year, despite industry-wide support.

"The shortfall is attributed to the slow ecosystem build-out, a half-hearted effort, at best, even though there is visible progress in overcoming the technical and standardization challenges," the firm said in a statement.

Last year Nokia, along with Asian and European carriers including KPN, Maxis Communications, Orange, SingTel, SKT and Wind, joined 14 wireless network operators that had initiated the project earlier. MasterCard, the world's biggest payment card company, is also involved in the initiative, which is faster and less costly than other wireless payment experiments that use SMS text messages.

Cingular, China Mobile, Vodafone, BellSouth Corp and Telefonica already support the common wireless chip format on their mobile phones. In partnership with chipmakers NXP and Sony, which pioneered the Near Field Communication (NFC) chip, the companies propose a worldwide standard for electronic wallets in mobile phones.