Already, smartphones can pay for Big Macs, Girl Scout cookies, and taxi rides. With the much-anticipated rollout of Google Wallet underway, some models will also be able to spend gift cards and pay at many more locations. Google Wallet and MasterCard PayPass, two examples of mobile money, work by storing your card data (from credit cards, prepaid cash cards, and loyalty cards) on your phone, then transmitting the info to the checkout stand when you wave or tap your device.
With new applications and improved phones making mobile money more common, this is a good time to master the basics:
[For more tips and advice, get your copy of 50 Smart Money Moves today.]
Tap-and-pay systems. Google Wallet and MasterCard PayPass transmit your encrypted payment information wirelessly from your phone or a keychain gizmo to a special reader. Some systems require physical contact between your phone and the reader, but a new generation of phones hitting the market in 2012 will turn the tap to a wave. While this may not sound like a big improvement over swiping a credit card, it might save you time and money as daily deals, coupons, gift cards, and loyalty rewards programs are integrated. Meanwhile, transit systems in London, New York, and Singapore are all evaluating PayPass as a replacement for metrocards.
PayPal mobile payments. Suppose you're at a San Jose Earthquakes soccer game and suddenly want a hot dog. You can order it from your seat with an app called Yorder, settle up using PayPal's mobile app, and wait for delivery. Customers of PizzaExpress in London can pay by entering a code from their restaurant check using their PayPal app. Some mobile banking applications similarly let you transfer funds; expect to see more as mobile payments explode in popularity. In 2010, PayPal customers spent $750 million in mobile money. This year, the company expects that amount to grow by a factor of four.
Roaming credit card readers. Use your phone to accept credit cards at your next garage sale, thanks to apps like Intuit's GoPayment. With that one, all you need is a free credit card swiper, available at www.gopayment.com, that attaches to your phone. Intuit takes a 2.7 percent cut of every sale. One Girl Scout troop in Ohio boosted cookie sales by 13 percent last year when the scouts starting using GoPayment.
Your customers don't need to worry that your phone will capture their number; the swiper reads the credit card and encrypts the information before transmitting it to the bank. But such fears could mean it takes years before mobile payment really catches on, predicts Sandy Shen, an expert on mobile financial applications with research firm Gartner. With all these systems, Shen says, "the technology is there to address security issues. The tricky part is persuading the consumer" that his money is safe.