Shoppers Check Out of Stores Via Cell Phone

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Because of the convenience they offer, mobile wallets can boost consumers' purchases. When Discover tested the stickers with more than 700 employees last year, the company saw "a good uptick" in how frequently participants charged purchases, says Farhan Ahmad, a general manager at Discover Network. He declined to detail the results of the trial.

North American consumers paid for less than $100 million worth of goods in 2010 using a type of mobile contactless payment chip technology that is known as Near Field Communication, according to telecom industry analysis firm Juniper Research. By 2012, the total could rise to $5 billion. NFC chips, made by companies that include NXP Semiconductors and Inside Contactless, contain tiny antennae that communicate with in-store scanners. Outfitted with these accessories, phones can function as electronic wallets.

NFC technology is one of several wireless payment options currently available for phones. A company called Square, started by Twitter co-founder Jack Dorsey, makes a small credit-card scanner that merchants can attach to their iPhones to accept payments. Obopay lets users of its smartphone application transfer money with their phones.

Contactless payments have long been popular in Japan and other Asian countries.Alcatel-Lucent (ALU) on Mar.23 said it would launch a contactless commerce service for mobile operators to offer person-to-person payments. There have also been contactless trials in cities including New York, London, and Vienna. And Nokia (NOK) builds NFC chips into at least one phone it sells directly to consumers.

contactless scanners rare in U.S.

In the U.S., contactless payments have been limited to small trials because of wireless carriers' reluctance to build NFC chips into their phones. Carriers, handset makers, and banks are still figuring out how they would divide related fees, say analysts.

An inadequate number of scanners for reading the chips in stores has been a further obstacle to adoption. Only about half a million merchants in the U.S. accept contactless payments, according to First Data.

Security has also been a concern, although consumers typically have to enter passwords or PINs to complete purchases made via NFC devices. "It's probably more secure than your traditional wallet," says Howard Wilcox, a senior analyst at Juniper Research.

Technology vendors committed to contactless commerce are working to develop enabled devices. Contactless payment chips could also serve as health cards that contain insurance information and health records or as security badges enabling entry to office buildings.

The contactless payment industry is also hoping for a boost from Apple. Based on recent patent filings, Apple may be working on a phone that facilitates contactless payments. "If Apple were to do it, the race for all the carriers to have [NFC-enabled] phones could become significant," First Data's McCarthy says. Apple spokeswoman Teresa Brewer didn't return a request for comment.

Kharif is a reporter for Bloomberg Businessweek in Portland, Ore.

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