I’m on the road today, so I’m turning the Wall Street Daily reins over to my trusted colleague, Justin Fritz.
Below, he hits on a topic the two of us have heavily profiled over the past several months – mobile payment technology.
Simply put, this is a high-tech, “touch-free” way of paying for goods, using semiconductor chips embedded in mobile devices, like smartphones. The driving force behind this concept is a technology known as Near-Field Communication (NFC), which allows you to wave your smartphone by a payment reader to complete a transaction. No traditional “swipe-and-sign” credit card routine. In fact, no need for credit cards at all.
The technology is already making serious progress and we expect it to become one of the hottest tech trends over the coming years. Especially since Google (Nasdaq: GOOG) just upped the ante with a major announcement. Here’s Justin, with the story…
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The day of reckoning is coming this summer.
No, I’m not one of those wackos, spouting an “end of the world” prophecy. I’m talking about something much more tangible – the rapid progress of mobile payment technology.
Don’t believe me? I’ll let the numbers do the talking…
- Mobile payments in the United States could total $56.7 billion in 2015 – up 990% from $5.2 billion in 2009.
- Gartner predicts that the number of people using phones for purchases will reach more than 190 million in 2012.
- By 2014, about half of all smartphones in the United States should be equipped with NFC technology.
- In a survey, over 60% of people between the ages of 18 and 34 said they’d feel at ease using their smartphone for point-of-sale transactions.
If you’ve read our NFC coverage so far, you’ll know about this trend. And there’s one company zeroing in on the market’s top spot: Google.
Google Wallet: Tap, Pay and Save in Five Easy Steps
Last week, Google finally spilled the beans on its eagerly anticipated mobile payment platform – Google Wallet.
And from what I saw during Google’s press conference, the technology definitely delivers.
Basically, Google Wallet is a complete wallet replacement.
The application currently stores credit cards, gift cards and loyalty cards. But other items, like your driver’s license and hotel room key, were also listed as storage possibilities.
Here’s how it works:
- Download the Google Wallet app and sign in with your Google account.
- Create a PIN code.
- Add credit card details. (Or just add money to the standard Google prepaid card.)
- The app sends the request to your bank for verification.
- The bank then sends the information to the payment services manager – First Data – which communicates with your phone’s NFC chip in order to securely transfer funds.
To make a purchase, you just tap the phone to the payment terminal. That sends credit information, coupons and loyalty cards through the merchant’s system at once. You can get a digital receipt to your phone, instead of wasting paper.
And you can load up the app with various discount coupons by surfing online, or by accessing a company’s page on Google Places. Google also showed how stores can send you personalized coupons as soon as you walk in.
And as for usage?
Why You Won’t Need Your Wallet This Summer
Since Google is teaming up with MasterCard (NYSE: MA), you can use the app at one of 120,000 PayPass-equipped locations in the United States (and 300,000 globally). So when the platform officially launches this summer, it will hit the ground running.
And as for your trusty wallet? You can leave it at home. Everything you need will be loaded into your smartphone, including your credit card information.
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The pressure within the industry is heating up, too. For example, eBay (Nasdaq: EBAY) has filed a lawsuit against Google, accusing the search giant of poaching two of its top executives (and trade secrets from PayPal) to develop Google Wallet.
But we’ll leave litigation drama for lawyers. As investors, who’s best positioned to capitalize on this?
Google’s Band of Wallet Brothers
It comes as no surprise that in advance of the launch, Google has already set up partnerships with some of the biggest players in the banking and retail sectors.
In addition to joining forces with Citigroup (NYSE: C), the company has asked retailers to help “usher in the next era of open solutions that add value for all players.” Among the first on the list: Macy’s (NYSE: M), American Eagle (NYSE: AEO), Walgreen Co. (NYSE: WAG), Subway and Toys R Us.
You can bet that this list will continue to grow, too.
~ NXP: Not only does NXP make the chip in Samsung’s Nexus S phones, it also makes them secure. That’s important because the NFC chip stores your credit card information locally. As Google pointed out, “Security was something we wanted to make sure was absolutely airtight.”
~ Sprint: Sprint’s involvement in Google’s launch doesn’t come as a shock. It was the first to carry an Android 4G device, the first to offer seamless Google Voice integration and the first to sell Google’s latest NFC-enabled handset, the Nexus S 4G.
What’s more, Sprint plans to “continually integrate [NFC] and work with our OEM partners… to make sure this technology works on all devices.” So it should continue to reap the benefits of Google’s NFC push.
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We’re Tracking the Next Generation Payment Process
Thanks for that, Justin.
There’s no doubt that the payment landscape has evolved rapidly. In 1998, for example, 70% of consumers surveyed said they wouldn’t buy items online. Today, 70% say they would.
And in the United States alone, e-commerce is expected to reach $1 trillion by 2013. We have our eyes firmly fixed on the next wave, with Near-Field Communication technology taking its first steps into the mainstream and mobile payments projected to hit over $630 billion in 2014.
Ahead of the tape,