E-Wallets / Mobile Wallets to Become the Norm

The pitch at Mobile World Congress 2011 was simple: by the end of the year, you'd pay for clothes, taxi fare, and dinner with your phone and leave the wallet at home. Visa was leading the charge, announcing a commercial US rollout of its PayWave mobile-payment system in the second half of 2011, built on short-range NFC wireless technology.

The chicken-and-egg problem was real. Handset makers had dragged their feet on embedding NFC chips -- the industry's GSMA trade group had called for them by late 2009, and three years later they were still trickling out -- and retailers saw no reason to install readers for phones that didn't exist. Visa's workaround was a microSD card that slid into a phone's SD slot (or a special skin for the iPhone), paired with the PayWave app. "People don't want to wait two years for NFC-enabled phones to come out," Bill Gajda, Visa's global head of mobile, told CNET at the show. "You can make payments today on the iPhone 4."

Trials were already running with Wells Fargo, Chase, U.S. Bank, and Bank of America. The footprint sounded impressive for 2011: 10,000 New York taxi cabs, CVS stores in New York City, McDonald's and Whole Foods in San Francisco, plus public transit in New York and Los Angeles. The readers used standardized tech, so they worked with MasterCard's PayPass and American Express's Express Pay too.

The security debate was where things got interesting. Visa argued the system was safer than plastic: every transaction generated a unique authentication code (unlike a magnetic stripe's static data), the phone had to be within centimeters of the reader, the radio shut off after seconds, and real-time monitoring flagged suspicious activity. Security researcher Collin Mulliner called it "fairly secure" but raised the specter of a Trojan horse hijacking transactions from inside the phone. DeviceFidelity chief executive Deepak Jain, whose company built the microSD tech, countered that no card numbers or names were stored on the card and unauthorized apps couldn't touch it. Researcher Karsten Nohl offered the sobering middle ground: "NFC is just another name for RFID and it carries the same promises, opportunities, and weaknesses as any other RFID incarnation."

Gajda's prediction -- "NFC technology will take off in 2011" -- was early, not wrong. Google was already working on a mobile wallet (reportedly code-named "Cream"), Apple was rumored to be eyeing NFC for a future iPhone, and Visa Europe was trialing the system in Turkey. The real takeoff came a few years later with Apple Pay and Google Wallet, but the direction Visa sketched out in Barcelona is the world we now live in: the leather wallet, for many of us, really did become the phone.