Toss the Wallet and Grab the Mobile

Forgetting to take your mobile phone when you leave for work in the morning may soon be debilitating for Europeans. Sure, the vast majority of workers already rely on their mobiles for everything from listening to music, to taking pictures, to watching television, to blogging. But that's peanuts, say industry analysts, who are sure that by the end of the decade, more than half of all Europeans will be leaving their wallets, bus passes and keys at home, and instead be using their "phones" to pay for lunch, click through subway turnstiles and even gain admission to members-only sporting events.

Such services are already live in experimental pockets across the continent, which is following Asia's lead. Since October residents of Caen, France, have been able to use their mobile phones to pay for groceries and parking. This season, football fans in the Netherlands can gain entry to their favorite stadium and buy refreshments with their Nokias. In Hanau, Germany, commuters now use cell phones as bus tickets. Last month Motorola launched the M-Wallet, interactive mobile-phone software that replaces physical credit cards with tiny phone screen icons. Execs at Vodafone Group, the world's largest mobile operator, and Sony Ericsson say that they, too, have plans to incorporate payment devices into their European handsets.

Powering this compact revolution is Near Field Communication (NFC), a short-range wireless chip that can be used to transfer all sorts of data--from credit-card details to bus schedules--and can be implanted into mobile phones. When a user touches his phone to an NFC pay point--basically a wireless reader that works by contact, as opposed to Bluetooth, which works over longer distances--credit is automatically transferred. Sony and Philips, which collaborated to produce NFC, have signed up nearly 80 leading banking, computing and telecom companies, including Visa, MasterCard, Nokia and Samsung.

These firms have financial incentives to see the venture succeed. When using a phone to swipe for a cappuccino becomes faster than cash, credit-card companies stand to bank more transactions. In Europe, personal payments made by card could soar from 6 to 14 percent by 2015 with NFC, according to MasterCard research--that's 18 billion additional transactions for card companies to cash in on. Contactless payment would cut retail transaction time by 63 percent compared with cash, according to American Express.

Will Europeans take to the NFC feature? They will if the Asian market is any guide. Since the launch of its credit-card handset in 2004, Japanese network operator NTT DoCoMo has sold 10 million of the phones. In Europe, NFC pay points are already starting to show up everywhere. Three million London tube riders now use "touch and go" Oyster cards, which could easily be transferred to phones.

Industry executives dismiss the most obvious concern. Security, they argue, is actually better on a mobile than in a traditional wallet. The whole device can be shut down remotely, and all transactions are PIN-protected. But there are other concerns. Do you want to load all your bank and credit-card details onto your mobile providers' Web site? Could hackers intercept transactions and steal money? And what happens if you lose your phone or it runs out of batteries? Success may ride on how well the industry answers these concerns, and whether users feel secure entrusting their lives to their mobiles.

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