Are smartphones the future of finance?

Android Money cropped 560x233 Are smartphones the future of finance?

Are smartphones the future of finance? This is a question that, provided with a substantiated answer, would stand to make a lot of people very rich. More individually, its answer stands to define how we interact with just about everything, and immediately it may affect our mobile purchasing decisions. I, for example, will most certainly require NFC in my next smartphone, and my guess at answering is yes, smartphones are the future of finance, but not for a while yet.

Smartphones are the ultimate electronic multi-tool, and are now becoming more and more usable as a bank-in-your-pocket. The most prolific use is mobile banking which ranges from basic overdraft text alerts to mobile check cashing—thanks to high-resolution cameras—to secure transfers and bill payments. The latest craze is credit card readers. Many self-employed and even large businesses are utilizing various add-on credit card readers—such as Intuit’s GoPayment—allowing for instant invoicing, payment, and receipt generation anytime, anywhere.

The mobile finance buzzword of the year is Near Field Communication, or NFC. NFC itself is not inherently money-related, but has recently become nearly ubiquitous with mobile payments. NFC has had an incredibly slow uptake by the market at large, but recent traction gains have some asking if this is the future of money. Could an ultra-successful NFC system spell the end for plastic, paper, and coins?

Credit cards and RFID chips—which are much more common outside the US than in—both give out their information without discrimination. Cash has no information to give. Security measures include dealing with trusted merchants and not losing your wallet. NFC has some serious benefits here. It’s still short-range, making hacking difficult, can be locked and/or password protected—to FBI-stumping levels, apparently—and has opportunity for wide adoption. NFC as a single platform could allow people anywhere to transfer money between hands without ever pulling out a wallet or a checkbook, or even having immediate internet access.

Your March Madness bracket swept mine? I’m selling something on the corner that you really want – maybe a local art piece, or a used phone? No need for a run to the ATM, no need for logging in and emails via PayPal. Heck I don’t even have to know you! All we need are two NFC devices and we’re in business—safely and immediately.

NFC is able to do things magnetic stripes and RFID tags can only dream of. I think the key to NFC, or anything becoming the new standard, is the development of a new crediting system. What’s needed is a system, like cash, where I can store proof-of-money on my device, not just with my bank.

As long as smartphones are only pass-through devices, I do not think NFC and similar technologies will really take hold. Why bother changing an entire industry for a slight bit of convenience for those who have NFC smartphones? Humans are too much creatures of habit, and we’re already habituated with paper and plastic. Granted, the same has been said for the transition to credit cards, and oh the uproar over the debit card system!

The industry needs to come up with a broad-spectrum certification system. A system not constrained to a particular manufacturer or carrier, in which I can “withdraw” money to my NFC device’s local storage, and then send it with a tap or a wave regardless of internet connectivity. If that happens, we will have a revolution on our hands.

And by this I do not mean that Google Wallet or ISIS will be extra-popular, or that plastic cards with magnetic stripes become less common. I mean a revolution that will not only oust credit cards entirely, but possibly cash too. The one caveat is that we have to develop a low-power, no-subscription device for the economically disadvantaged or the technologically uninterested. Like a credit card …phone.

Of course there are innumerable security and privacy concerns to be dealt with here. But in the end, I think we are on the verge of a money revolution, at least in first-world countries. I do not think it will happen this year, possibly not even this decade. But I think change is coming and mobile NFC applications are only the start. The question is: will it ultimately make our lives better or worse? That, I suppose, is up to us.

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