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Can Smartphones Replace Credit Cards?

While the Bank of America has partnered up with Visa to begin testing out mobile payments later this month, analyst firm Forrester says one big question remains – are consumers ready to ditch their plastic?

According to Forrester analyst Emmet Higdon, the test is less one of the technology involved, but the user interface and whether or not “consumers’ current love affair with smartphones is enough to change card payment behaviors that date back more than 50 years.”

The mobile-payments trial run involves equipping a group of users’ phones with near field communications (NFC) technology, which currently does not come installed, but we expect to see as a pre-installed feature in the near future.

To make any headway, writes Higdon, “banks need to convince customers that using a mobile wallet can be as simple and convenient as swiping a plastic card”. Beyond that, companies would also need to ensure security and privacy, “as well as competitive issues regarding control of the mobile wallet application itself – before any broad consumer rollout could be contemplated.”

Perhaps, though, mobile payments aren’t entirely about the transaction itself, but the whole experience. Online payment systems could make it much simpler to transfer funds and to put limits on spending, features that might not be available for credit or debit cards. There’s also the issue of security. A recent episode of NPR’s On The Media discussed mobile payment systems and related how they can actually be more, not less, secure than cash. For workers in South Africa, the story went, everyone would get paid on the same day and often, returning home from work could be a scary time, as the chances of getting mugged were higher. Therefore, getting paid virtually rather than physically, was actually safer. Another possibility is that NFC could replace plastic in locations where completing credit card transactions become difficult, though mobile credit card solutions are becoming increasingly common.

According to Higdon, nearly 50% of iPhone users are interested in mobile payments. Are you one of them? And if so, why, because we can’t imagine that the debit card in your pocket is taking up too much room. What is the value added by mobile payments?

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