Mobile payment systems are about to become real as companies introduce their offerings and technology to the world. Buying goods or services with your smartphone is almost second nature. We’re all getting used to searching and tapping or scanning to pay.

Scan and pay will be the paradigm shift that transforms mobile commerce. Combine scan and pay with intelligent apps and you have a powerhouse waiting to be unleashed: If you’re paying for something at the register with your smartphone, the retailer may offer you 25% off if you immediately sign up for their credit card, or offer you a heavily discounted scarf to go with your new fall coat. Impulsive shoppers better destroy their smartphones now and pull out the old flip-phone from 2001. The key to merchant success is instant analysis of what you’re buying so they can offer you a complementary or similar item to “buy now”.

Visa, PayPal, Square and Google have been tinkering in this space for quite some time and it looks like their offerings are about to show some fruition. Mobile transactions are already totaling $240 billion annually, but a recent study by Juniper Research reports that by 2015, the transaction totals may reach over $670 billion.

Smartphones, with their built-in carrier service and vast library of available apps, are perfect “wallets” — you always have it with you, and it can securely store your financial information. Some carriers in the US are beginning to test systems that will allow consumers with smartphones that have NFC (near field communication) chips to make purchases by touching the device to a merchant payment terminal. You may be wondering: what is NFC? NFC works like this:

  1. A simple connection between two devices is initiated with a physical touch
  2. There must be an “initiator” and a “target”. Your smartphone would be the initiator when making a purchase
  3. The initiator generates a radio frequency (RF) field with a range of about 4 centimeters
  4. The target picks up the RF field and receives the data completing the payment request

But your smartphone is not simply a payment mechanism. Remember the word “smart” connected to the word “phone”. Retailers will be able to offer you loyalty points, coupons, and redeemable items via your smartphone directly before or after your purchase. Starbucks is already doing this with their updated app: buying a latte earns you points that add up to free items.

As is typical in the tech industry, the different players are fighting it out for dominance. Verizon Wireless won’t allow Google’s Wallet on any of their devices, and AT&T was disabling NFC on phones to stop them from using Google Wallet. T-Mobile is piloting its own Isis payment system in Salt Lake City and Austin.

The tech wars will ultimately provide a winner — more than likely multiple systems for quite awhile. Once there is convergence, however, you’ll be the actual winner — and from then on you can leave your over-stuffed wallet with all that old-school paper money at home.

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Brandon Carson

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