A reader recently emailed, “Do you believe the transition to electronic cash, digital payments and mobile payments will wipe out cash as we know it in our lifetime?”
I can you tell you the world’s certainly preparing for it. At an ever-quickening pace, too.
- In November 2010, three top mobile carriers – AT&T (NYSE: T), Verizon (NYSE: VZ) and T-Mobile – announced a joint venture to form the Isis mobile payment system.
- Then in September 2011, Google (Nasdaq: GOOG) quietly launched its mobile payment platform, Google Wallet.
- In May 2012, eBay Inc.’s (Nasdaq: EBAY) PayPal unit announced deals with 15 retailers to use its system for mobile payments.
- Not three months later, on August 8, 2012, Starbucks (Nasdaq: SBUX) selected mobile payment provider, Square, to process payments from caffeine addicts at its 7,000 locations.
- And then on August 15, 2012, a group of retailers including Wal-Mart (NYSE: WMT), Target (NYSE: TGT), Sunoco (NYSE: SUN) and 7-Eleven announced a joint venture to create a mobile payment network of their own.
The all-knowing research analysts seem to be embracing the idea of a cashless society, too.
A report filed by Juniper Research last month predicted a four-fold increase in mobile payments to $1.3 trillion annually by 2017.
I wouldn’t burn your cash or throw out your credit cards just yet, though. A major roadblock still exists that’s preventing the transition to a cashless society. Ironically, it’s also creating a significant investment opportunity.
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Convenience Won’t Cut It
I’ll be the first to concede that Near Field Communications (NFC) technology is downright convenient. I mean, a quick tap or swipe of a mobile device near a register sure beats whipping out a Constanza wallet.
Unfortunately, though, the world’s setting up for that convenience to be delivered in a confusing fashion. We’re just getting started and we’ve already seen the creation of five different mobile payment systems. That’s not going to work.
As Robin Sidel of The Wall Street Journal says, “You really need one platform. People don’t want so many choices that they don’t know what they’re doing at the register.” Yes, convenient and uniform is best.
Another factor that promises to hold back the adoption of cashless transactions? Consumers tend to embrace money-related technology at a much slower pace.
Case in point: Check writing should be dead in a world with debit cards, PayPal, Western Union and electronic bill paying. But over 30 billion physical checks are still being handwritten each year.
However, the biggest reason we’re not going to move to a cashless society anytime soon is security.
Consumers aren’t going to embrace mobile payments at all without assurances that their personal financial information is safe and protected.
I’m sorry. The use of multiple passwords and/or PIN codes in current applications like Google Wallet won’t cut it. People will always worry about their passwords being stolen. And that fear has been validated.
In February, security firm, Zvelo, proved it could extract a user’s Google Wallet PIN code. Granted, Google has since corrected the security issue. But that doesn’t mean the fear suddenly disappeared, too.
As I told subscribers to my premium advisory service, MicroCap Tech Trader, in February, “Before NFC or similar applications using highly valuable personal information really gain traction in the marketplace, I’m convinced another layer of security is going to be required by consumers.”
And that extra layer of security (and, in turn, investment opportunity) is biometrics.
It’ll get the job done. And it’s the most market-ready solution
Various government and law enforcement agencies have been using biometric identification systems for years now. Clearly, it works. What’s more, cutting-edge technologies often get their start in government applications before trickling down to commercial and consumer markets. So the timing is right, too.
Bottom line: The only way we’re ever going to move to a cashless society is if biometric identity technologies are incorporated into mobile devices. Based on Apple’s (Nasdaq: AAPL) latest move to acquire AuthenTec (Nasdaq: AUTH), it’s not a matter of if it’s going to happen, it’s just a matter of when.
Next week I’ll share the two best ways to invest in the biometrics opportunity. So stay tuned.
Ahead of the tape,