Mobile purses

Market strategists have long set their sights on the potential of mobile financial transactions. Business in this sector has been growing fast. In 2010, less than $50 billion (39.72 billion euros) changed hands via cellphone. In 2011 that figure was twice as high. US market researcher Gartner expects another marked rise this year to reach $170 billion.

Boom in developing nations

Currently, the most widely used technology involved in mobile money transactions uses text messages (SMS). The biggest sums transferred that way are recorded in Africa, the Middle East and Asia where mobile phones are widespread and bank branches are few and far between. SMS-based transfers are particularly popular in Kenya and the Philippines.

But worldwide, the sector is far less expansive. In North America and Europe business is stagnating, since mobile phone payment is only one of many ways of sending money from A to B. Other technologies, such as credit cards or online banking, have also not been able to make cash superfluous. And yet Volker Briegleb from Germany's c't computer magazine remains confident. "Mobile payments clearly have a big future ahead of them," he says.

No breakthrough yet in western countries

And there is now a technology available which has the potential to convince the skeptics. Near Field Communication (NFC) is being promoted in the US by major players like Google and Microsoft, and now communications giant Deutsche Telekom plans to introduce it to Germany and across Europe by forming an alliance with MasterCard.

NFC is even easier to handle than SMS-based transfers. Banking and credit card data are stored in mobile phones, so that users don't need a whole array of chip cards anymore. You punch in a security code, choose which account to pay from, and swipe your "mobile wallet" through a reader - that's it! Sums below 25 euros are deducted right away. Otherwise a second code has to be provided for extra security.

Really safe?

Peter Vesco, head of Deutsche Telekom's Payment Department, maintains conventional forms of fraud such as phishing and data theft are ruled out by NFC. "On the basis of our current state of knowledge, this technology is as safe as chipcard payments," Vesco says.

But what if your mobile wallet, your mobile phone, gets lost? Then you wouldn't have to call up all your different banks to inform them. Giving Telekom a shout would suffice to simultaneously lock all your cards.

First field tests have been encouraging. German railway operator Deutsche Bahn has had positive experience with NFC technology, and so have German savings banks. MasterCard installed the first reading devices in Germany a couple of months ago, notably at fuel stations, restaurants and selected retail stores.

Slow introduction

But c't editor Volker Briegleb says introducing NFC nationwide will take some time. "It's the usual game of everybody waiting for everybody else to start: retailers will only step into action when there are enough suitable mobile phones around," Briegleb says. "And consumers see no reason to buy NFC-enabled phones, if they don't know where they'll be able to use them. And finally, the manufacturers don't see any reason to make such phones. So Gartner's market researchers therefore don't expect a worldwide breakthrough before 2015.

Deutsche Telekom leaders believe the project needs a push. As only a small fraction of mobile phones currently boast NFC-enabled cards, the company simply glues storage stickers on the phone, calling the move a "bridge technology".

Interim solution needed

Actually, those stickers would function even without any mobile phones, meaning one could just as well attach them to, say, wallets or key-rings. But Telekom's Peter Vesco says that's the second best solution. "According to our estimates, 80 percent of people always carry their mobile phones with them, and that's why having NFC technology incorporated directly in these devices makes sense," Vesco concludes.

Volker Briegleb speaks of a high psychological hurdle that needs to be overcome before consumers are prepared to use that sort of technology. But big companies are sensing big business in the long run. "For enterprises like Google, Microsoft and Telekom the mobile transaction market obviously appears big enough that they want to be ready for it," he says. Even if only small fees are levied for each transaction, it's the potentially huge number of mobile payments that counts in the end.

Author: Klaus Dahmann / hg
Editor: Michael Lawton