The rise of mobile payments

Apple's possible inclusion of a NFC chip in the next iPhone model could define the future of cash-free commerce.

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    From built-in cameras, to touch-screens, voice-activation to its app store, where Apple’s iPhone goes, the rest of the tech world tends to follow.

    Each new model has been notable for its adoption of new and innovative technologies and Wednesday’s unveiling of what is expected to be the iPhone 5, could be equally important.

    The rise of the smartphone as a way of making payments has led to a number of competing technologies. Apple’s choice and adoption of one of these could define the future of mobile cash-free and card-free commerce.

    A leading contender is the NFC or Near Field Communications chip. It is already in some Samsung smartphones, but is yet to be widely adopted by both phones and users. It allows you to touch something on to a reader and transfer information. Once the chip is embedded in your phone and connected to your bank account, that purchase could be a payment for a soft drink, a train ticket, or any other data.

    The technology offers convenience but also considerable savings. By reducing transaction costs it is believed a cashless payment system could save as much as 1 per cent of GDP. That would amount to around $150bn in the US alone.

    About $172bn of transactions are currently made using mobile phones. That figure is expected to rise to $600bn in the next four years.

    "Using your phone to pay for things is nothing new in Tokyo," says Al Jazeera's Mike Firn in the Japanese capital. "You can use it as a key to get into your house. You can use it as a personal ID or you can use it as a ticket on public transport."

    The technology has also been adopted widely in some parts of Africa.

    "It's been so popular that about 80 per cent of the country’s mobile phone users have accounts," says Al Jazeera's Peter Greste in Nairobi. "Anybody can use it. You don’t even need to have a bank account to be registered. Just have a mobile phone. People pay their bills with it. They send money to friends and relatives around the country."

    Some supermarket chains in Kenya say about 15 per cent of their customers buy their groceries with their mobile phone. The technology has been credited by some as one of the key drivers for Kenya's impressive economic growth.

    "There are two challenges to overcome before this system gets widely used," says Al Jazeera's Rob Reynolds in Los Angeles. "One is getting consumers used to the idea of paying for things with their phones. The other challenge is convincing consumers that it's safe to link their bank accounts to their phones. And with constant concern about hackers pilfering personal information online, that could be a tough sell."

    Whether or not you own an Apple iPhone, or want to buy its latest offering, the company’s influence on the tech world means the iPhone 5 could well influence how you make payments in the future.


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