Mobile phones could become the new wallets as the ubiquitous mobile starts to take on new functions.
This is already true of some early adopters like Dr Rudiger Hausmann, vice president of intelligent services at Siemens, the mobile phone company, who says: "My phone is my wallet."
Think how convenient it would be. No change for a parking metre? Use your mobile to buy an hour's parking. Want a cold drink? Just pay with your mobile. Even large items, such as plane tickets, could be paid for with a mobile "wallet", says Steven Day of Virgin Mobile.
But will consumers and businesses take to this form of payment? After all, shopping on the internet has not grown as quickly as market research firms predicted.
Dr Hausmann believes payment using a mobile will take off more quickly, partly because people carry their phones wherever they go. Mobile operators agree, and are keen to earn a share of the potential transaction revenues.
Orange is running a mobile payment service in Denmark. Vodafone launches a UK micropayments service next month, and last week began trials of a global mobile payment system called M-Wallet in the UK, Germany and Italy.
Nokia, the mobile phone manufacturer, is also helping to drive interest. Its 6340 phone, which goes on sale in the first half of this year, allows users to store credit and debit card information in standard Electronic Commerce Markup Language along with shipping addresses, in an encrypted area of the phone's memory.
The details can be transferred to Wap mobile internet sites. It is already possible to pay for lunch at the Circus restaurant in Soho using a mobile, if you have registered with the Paybox mobile payment service, part-owned by Deutsche Bank. After dining, you give the waiter your mobile number and he phones Paybox's voice response service and gives it to them.
The service will say "please hold". While holding, Paybox will automatically call you on your mobile and ask you to type in your PIN to authorise the bill. Then it will tell the waiter the bill has been paid. Paybox can also be tied in to the restaurant's till or computer system to save a call.
In Germany, Paybox can be used in places from hairdressers to nightclubs, says Barry Shrier, the company's UK sales and marketing director. Money is directly debited from the user's bank account, so users are credit-scored and given a spending limit when they sign up.
Mobiles have the potential to be a more secure form of payment than alternatives. First, there is the built-in security of customers having a physical device with them to make the payment.
Second, payment products are emerging that give the customer more control over their spending than existing methods, such as cash, debit/credit cards or cheques.
For example, pay@once software from Siemens and Brokat, the German financial technology company, updates users' spending history instantly when a purchase is made.
It is being used in customer trials at the D2 Vodafone network in Germany. Users can see at a glance the amount of money remaining. How does m-payment work? In Denmark, Orange customers register at its website, giving their name, mobile phone number and credit (or debit) card details. They are then allocated a PIN.
This equips them to shop with 63 retailers including Ikea, the furniture chain, Interflora and Domino's Pizza. They can purchase goods via Wap or on the net. A mobile text message asks: "Please enter PIN to confirm Ikea sofa purchase for DKr3,600."
Transactions take 10 seconds to clear, the same as using a credit card in store, according to Olivier Lamer, payment solution manager at Orange Denmark. Orange plans to introduce the service, which won a user-friendliness award last year, to other countries.
Vodafone's global payment system works in a similar way. Vodafone's Janine Young says: "Up to three payment methods - credit card, debit card and direct debit - can be associated with one mobile phone number. The PIN the user gives will indicate which card or account is to be debited."
M-Wallet can be used to buy goods over Wap or the net and will be extended to purchases in bricks & mortar stores. Vodafone's micropayment service will enable UK customers to charge purchases to their mobile bills. This is possible now using "reverse charge SMS" to buy a new ringtone, but charges can only be made in multiples of the cost of a message, eg 10p, 20p or 30p etc.
The micropayment service launching in late February will make it possible to pay for items costing anything from 5p to £5. One of the biggest early uses of m-payment is to top up airtime on the phone itself. The Irish company Network365 has devised a mobile wallet for topping up airtime.
The system allows operators to alert the customer that their account is low. Day says:
"Phones are already half way to being wallets. They include prepaid 'cash' or a mandate to deduct money from the user's bank account. And the SIM cards inside use the same technology and are made by the same companies that make the microchips for 'smart' credit cards."
He expects to see micropayments, for buying MP3 music files, and tickets for Virgin trains, soon. A cinema ticket-buying system for mobiles from the UK-based Digital Rum is already underway; the company has agreements with Odeon cinemas, Vodafone and T-Motion, the mobile portal available to One2One users.
An m-payment trial for parking in Dublin and Croydon was announced yesterday by Mobile 2 Meter of Ireland. Drivers register on the net, then phone a number on the parking meter, indicate how long they want to park, and get an itemised bill by email. However, analysts are wary about the near-term picture.
Amrish Kacker of Analysys says: "Obstacles remain, such as the lack of a single mobile-payment standard." Even in Finland, m-payment's growth has been underwhelming. Lars Vestergaard, research manager for wireless at IDC, says:
"The next 18 months will see lots of trials in the UK and southern Europe, with m-payment being adopted in niche areas like ticketing and entertainment. It will take longer for mass acceptance but m-payment is going to be huge." Cash will never die, but it is going to get easier to leave your wallet at home.
