Maryland Bar Bulletin
Publications : Bar Bulletin : May 2006

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Paying by Cell Phone

I've bought things with my cell phone. Why, just yesterday I bought a new ringtone. It was downloaded right to my phone and everything.

But that isn't the type of buying we're talking about. We're talking about dinner, a movie and bus fare (don't count on a second date).

The practice has already been put into use in Japan, where you can transfer money to a mobile-phone wallet and pay for items by simply waving the phone within a few inches of a special display. These payment-readers use radio-frequency ID technology to instantly purchase items from stores, restaurants, video arcades and vending machines around Japan.

These radio-frequency chips are not the only method being developed, and the technology is still evolving. Some other techniques also include texting, special cell phone money accounts and adding purchases to your monthly cell phone bill.

PayPal Mobile
PayPal has just announced the launch of its new service that allows their subscribers to access their current accounts through text messages with their cell phones.

By sending a simple text message to PayPal, subscribers can transfer cash to a friend or purchase a product from a merchant, who will then ship it as if it were a typical online PayPal transaction. It can also be used to make electronic donations to charities.

Anytime you see "Text to Buy" next to something you want to buy – on a poster, in a magazine, at an event – you can securely order the item by text message.

After sending your text message, PayPal calls you back to confirm the order and asks for your mobile PIN number. When it is confirmed, the item is shipped to the address listed in your PayPal account. This method confirms that the customer actually owns the phone that he or she has activated. If a call is dropped before payment details are complete, you can send it again without worrying about paying twice.

Just like their traditional service, PayPal Mobile is free to send money, though wireless carriers may charge fees for receiving text messages.

Instead of using the credit card attached to a Cellular Wallet for each transaction, you can load up an Obopay account once and draw on it when needed. Obopay customers create special accounts which allow account-to-account transfers. Parents can send money to their kids or friends can split restaurant bills. After the money has been transferred it is instantly accessible via the Obopay debit card.

Banks & Financial Institutions
Credit card companies and banks are planning to embed a new form of radio frequency technology into cell phones that will allow customers to wave their cell phones at a point-of-sale reader, which will take the credit card or debit card information that has been electronically inserted into the phone to process the transaction.

Thousands of retailers and restaurants like McDonald's, CVS and KFC have already begun installing electronic readers. Currently, however, there is only one phone, the Nokia 3220, that can support the new payment chip. Other companies like Samsung and Motorola are also working on phones with e-wallet capabilities.

Cell phone-wallet transfers will actually be safer than traditional credit cards because the data will be encrypted when it's transferred without anyone seeing the actual credit card number or holding your phone.

A lost cell phone is also easier to detect than a missing credit card, and the device also offers users the ability lock their phones with a pass code. And in the event of a stolen phone, the payment portion of the phone can be shut down through a call to your bank.

Promotions & Rewards
By purchasing items using your phone you may also receive alerts about sales, in-store coupons or exclusive loyalty rewards. This might save you some bucks or have you blow you budget depending on exactly what type of deals they pass along. The idea is nice in that you can see where you might be able to save some dough on something you were going to buy anyway, but I'm a little concerned by the possible number of alerts I may receive. Personally, I may steer away from certain purchases if I face the prospect of a new breed of telemarketing.

Cellular Banking
Another benefit of using a cell phone over a credit card or a key fob with a chip is that it will make it easier for users to manage their money. Many of the banks are working to allow their customers to check on their balances, transfer funds and pay off bills from their cell phone.

Cell phones have experienced a rapid evolution, and the technology is so adaptable that it shouldn't surprise many that they may replace credit cards the same way that credit cards have replaced our cash purchases. Think of all of the purchases you can only make by credit card. How differently will we purchase items as this technology develops? I, for one, can't wait to find out.

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Publications : Bar Bulletin: May 2006

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