MasterCard Offers a Piece of the Mobile Payment Puzzle

mastercardMasterCard today announced a program that allows its issuing banks to essentially turn your cell phone into a one of the credit cards (provided you already have one, of course) at any merchant that uses the payment processing company’s PayPass program.
Vendors that have PayPass systems include McDonald’s, Rite-Aid, United Artist Theaters and BestBuy. A buyer would simply wave their phone at a PayPass terminal to complete the sale, rather than use their credit card. It sounds pretty cool, but today, no one in the U.S. could actually use their phone to buy a burger from Mickey D’s.
While MasterCard has taken care of the logistics of getting your card securely on your cell phone via a consumer-friendly process, no banks are yet issuing such mobile-friendly cards to their customers. Even if they did, wireless carriers aren’t supporting the type of phones necessary to communicate with the PayPass system. So basically, this is a whole lot of nothing. But it makes a great case study to track all the moving pieces in the mobile payments sector, and because it involves a large payments processor like MasterCard, offers the hope that one day these things may all line up into one beautiful mobile payment utopia. Or maybe Visa’s efforts will win out.
Either way, MasterCard’s new program takes care of provisioning a phone with the card information, and provides a method for banks to offer mobile payments via MasterCard to consumers. Now banks need to take MasterCard up on the program and offer MasterCard on phones for consumers. Although James Anderson, V-P of product development in MasterCard’s mobile division, told me that “serious banks were making plans,” he couldn’t name any customer commitments.
And we’d still need to get near-field communications chips and antennas built into our handsets. The first is a possibility, but the second requires a leap of faith by device makers and operators who will eventually carry the phones. Nokia offers NFC-capable handsets, although few carriers have offered them to subscribers. An ABI Research Study from earlier this year suggests NFC phones will take a while to arrive. Alcatel-Lucent is pushing NFC in its month-old tikitag offering, so perhaps the technology will find a home in consumer gadgets. After that it should only take carriers another two years to offer the handsets.
So kudos to MasterCard for the effort, but I worry that by the time I can use my phone as a credit card, the cost of the goods I’m likely to buy will rise above the $25 quick-buy limit. If that happens, I need a signature and possibly another form of identification in order to complete the transaction. I won’t toss my wallet yet.