2012 Business: Consumer Spending

WALK INTO A STORE,

submit your shoppinglist, and a map directs

you to the peanut-butter-brittleice cream you crave.When youget to the front of the line, justbump your phone on the readerand you also get a discountvia an e-coupon you've down-loaded. Or scan pictures of thelasagna, salad and French breadyou want fordinner from aSafe-way ad as you wait for the trainand pick up the bag on your wayhome. This is the year the surg-ing popularity of the mobilewallet-a smart phone that alsoacts as credit card, checkbookand shop-bot-will radically

TheEndOf CashMobile wallets-andmore ways to use them-aremaking money less usefulBy Deirdre van Dyk

shift shopping habits. It's thebiggest thing in retail since thecredit card got us talking abouta cashless economy.

The driving force is com-munication: cash can't com-municate, but phones can. Youralarm clock, radio, camera,land line and GPS, even yourlaptop, have already been dis-placed by your phone. Why notthe $69and four credit cards theaverage American carries? "Ev-erything eventually migratesto the cell phone," says ScottEllison, an analyst with IDCwho tracks the mobile indus-try. ''Andwhen it moves, peopletend to do a lot more of it."

Tammy Lam, 26,ap.r.execu-tive in San Francisco, uses herT-Mobile HTC myTouch phoneto pay forjust about everything."I ordered dinner from my localThai on GrubHub while sittingon the bus on the way homefrom work last night. I boughtall my Christmas presents onmy phone. When friends and Iare out, we use Groupon to buya meal," says Lam, who uses herphone instead of her computerfor shopping even when she'sat home. And she prefers it tocards or bills when she's out. "Ihate cash," says Lam.

Lam is an early adopter, butthere are enough people likeher to set off a mobile-walletwar that will escalate thisyear, converting billions of dollars' worth of transactionsto cashless in the $4 trillionretail economy.

Google, the company thatchanged online search, justlaunched Google Wallet inpartnership with Citibank,MasterCard and Sprint'sNexus S 4G phone. PayPal,the company that solved se-cure online payment, will an-nounce 20 partnerships thisyear designed to, allow you toorder ahead, self  -check-outin stores and simply use yourphone number and aPIN to payfor purchases. Isis-a Verizon,AT&T and T-Mobile walletwith Visa, AmEx, Discover andMasterCard partnerships-launches midyear in Salt LakeCity and Austin. Visa's own

34 Photo-Illustration by Thomas Hannich for TIME

 

virtual wallet, V.Me,is also ondeck. "Anything with an onswitch could be a payment de-vice," says Anuj Nayar, PayPal'scommunications director.

And of course, everyoneanticipates a move by Apple,whose stores are already pro-cessing sales through iPhones.Apple will announce a walletthis year, predicts Mark Beccue,a mobile analyst with ABI Re-search. "They have such a loyalfollowing, and they're so verti-cally integrated-they'll helpmove everything forward."

One-Stop ShoppingMOBILE WALLETS WORK IN DIF-

ferent ways. Google and Isisrely on NFC, or near-field com-munication. Basically, thismeans the phone and the salesterminal talk to each other, TheSubway sandwich chain is in-stalling NFC in about MOO of its 25,000 locations; 219 Macy'sand Bloomingdale's stores have

it up and running; Jamba Juice,OfficeMax, Coke vending ma-chines, even New Jersey Transittrains are set up to take pay-ments with atap ofyour phone.Some of the more fantastic as-pects of these schemes-liketapping a sign at Home Depotthat automatically calls a ser-vice rep-require stores to befitted with NFC equipmentthroughout, something thathasn't quite happened yet. Butthe pattern is set. "Consum-ers expect to use one click tobuy just about anything," saysOsama Bedier, vice president of payments at Google. "There areno checkout lines online."

Mobile wallets can also beyour shop-bot, sniffing outexclusive offers-say, $2 off oatmeal at [arriba Juice as youwalk by. Not hungry? Save thecoupon to the wallet, whichwill automatically activate itwhen you buy your next oat-meal. "Twenty years ago, wehad zero need for digital pay-ments," says Bedier. "But todayyou can't buy a song or a gameor an app without them. In-creasingly, it will be hard toget a lot of experiences on offerwith just cash." There's some-

thing ironic about getting yourmoney's worth only if you're

not actually using money.PayPal, with its ID3million

account holders and 9 millionmerchants, is betting on thecloud: store your informationand access it from any comput-er or phone. Ithas been buyingup companies, at least a dozenin the past year, that specializein bar code readers, inventorytracking or offering location-based deals.

And PayPal is working withretailers to put it all togetherin apps. Like Google, PayPal isbuilding in loyalty cards andcoupons and trying to wrapup other capabilities-likeskip-the-line checkout at cof -fee shops, grocery stores andhome-improvement centers-before NFCis built in. "There isnothing you can imagine thatisn't happening," says ScottThompson, president ofPayPal.

The goal is to reduce frictionin retail. To solve the lunch-hour crunch at Pizza Expressrestaurants in London, for in-stance, PayPal created an appthat allows customers to enterthe number from their bill intotheir phone and then pay with-out waiting for a server to run acredit card.The potential glitch?Ifyour cell service or wi-fi goesout, so does your ability to pay.

Starbucks' app, which hasbeen used 26 million times,allows customers to tap theirphone to pay for their triple-venti lattes; mobile paymentshit 6 million in a recent nine-week stretch. LevelUp users gettheir own QR codes they canscan at 1,000 retailers to payfor coffee or pizza. Shop Savvy,a price-comparison tool, hasadded a buy button. AisleBuyeris a line buster, allowing you todo scan-and-buy self -checkout.

Certainly consumers seemready to ditch paper and plastic.Every day, apps are launchedthat accommodate person-to-person transactions, givingyou the ability to pony up yourshare of the rent as well as theability to skip the checkoutline. And 32 million bank-ing customers are managing

'Increasingly, it will be hard toget a lot of experiences on offerwith just cash.'-Osama Bedier, VP, Google

their money very comfortablyon cell phones. Chase alonemoves $3 billion a year on mo-biles with an app that allowsyou to deposit to checking viaa cell-phone photograph or payfriends for your share of themoo-shu pork by phone trans-fer. PNC Bank's app allowsyou to move money from oneaccount to another by slidingyour finger along a bar.

The future of mobile trans-actions has already arrived-in Africa. In a market with fewbanks and even fewer ATMsbut with a cell-phone networkthat makes the U.S.'slaughableby comparison, mobile bank-ing is the standard. In Kenya,18 million M-Pesa users nowmove 20% ofthe country's GDPvia simple text messages. Pret-ty impressive for a programthat started in 2007.

Christmas BreakthroughTHIS CHRISTMAS SEAS ON IS A

window on the mobile wallet'sdevelopment. Salvation ArmySantas used mobile phonesto take payments, there were500% daily jumps in mobilesales on PayPal, and customerspulled out their cell phones tocheck reviews and compareprices in stores in never-before-seen numbers. Amazon even

offered $5 off to customerswho scanned a bar code in astore-so Amazon could offera lower price on the same item.This "scan and scram" behav-ior infuriates brick-and-mortarretailers, who fear they are sim-ply being used as a showroomfor online retailers. They maybe right-but consumers nowhave a price-discovery tool thatgives them more power, andthey aren't going to give it up,

Our comfort and routinewith cash and credit cards have

been barriers of a sort. But mo-bile payment could jump thefence and ~ove faster than any-one expects. When Haiti washit by an earthquake in 20ID,

the Red Cross raised $32 mil-lion, $IDat a time, via text. Ulti-mately, mobile payments madeup 7% of the money raisedfor Haiti. "We call it the gamechanger," says Roger Lowe, thecharity'S spokesperson. "Iftheysay people aren't already usingtheir phone for payments, Ihave 32 million reasons to be-lieve they are."Mobile-paymentplatforms could power socialmovements too. WePay, anonline-payment system thathelped the Occupy movementraise $680,000, will launch mo-bile capabilities in the summer.

The mobile wallet, pre-dicted to be worth $12.5 bil-lion this year according to ABIResearch, is about not just the Minority Report-style cool-retail factor but also practicalthings like ...money. "The con-sumer will save money, in partthrough deals that are basedon past purchases, not justrandom offers. And they'll getbetter financial control," saysMcKinsey's Philip Bruno,

But on an everyday level,the mobile wallet's big promisemay lie in the little problems itcan solve, "If it's a busy lunch-time and I can preorder andprepay at Chipotle, skippingthat long line," says CharlesWilson, who helps companieswith social-media strategies,"then it's a godsend." Or as EdMcLaughlin, head of emergingpayments at MasterCard, says,cash will never goaway but willonly become less useful. "Cashis going to be like the postagestamp. If you aren't used to us-ing it, it won't make a whole lotofsense why one would." •

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