¶ … Cell Phone as an Electronic Wallet Rapid advances in technology in recent decades have brought about a dramatic change in the way people work, transact and communicate. Yet, it is widely believed that there is still ample scope for technology to make life even more convenient and efficient. For instance, the cell phone is already showing the promise of functioning as an electronic wallet. It is the purpose of this paper to demonstrate that using the cell phone, as an electronic wallet, will in fact add a great deal to convenience and safety, especially in the area of replacing plastic credit, debit and smart cards.

paid card; convenience; efficiency; safety; security; electronic; identification; business; bank; credit card company; consumer; transaction; identity theft; fraud; charge back; commissions.

Introduction

Advances in Information Technology and Communication in recent decades have brought about a dramatic change in the way people live, work and play. Consider, for instance, the manner in which the Internet and the mobile phone have significantly changed the communication landscape or the way that ATMs and plastic cards have replaced bank tellers and the need for cash. In fact, it is now hard to imagine a world where one is unable to stay connected with family, friends, and business associates round the clock, irrespective of geographical location. Similarly, long queues to pay bills or withdraw cash are now pretty much inconceivable in a day and age when shopping, banking, and even tax returns can all be done online.

Indeed, the impact of modern technology on human society and life is reflected in the fact that 64% of all Internet users say that their daily routines and activities would be affected if they could no longer use the Internet (IT Facts, 2004, para 2). In a similar vein, it can be inferred that the 175 million U.S. adults who currently use the convenience of a debit card to pay for their purchases or the 180 million (62% of the population) who use cell phones (Mobatech, 2003, para 6) would express a similar sentiment about the convenience of card payment or mobile communication.

Still, it is widely believed that there is ample scope for technology to make life even more convenient, efficient, and secure through better integration of voice and data devices. For instance, the cell phone is already showing the promise of functioning as an electronic wallet. It is the purpose of this paper to demonstrate that using the cell phone, as an electronic wallet, will in fact add a great deal to convenience and safety, especially in the area of replacing plastic credit, debit and smart cards.

Current trends in consumer usage of Information Technology

The conveniences afforded by modern technology have naturally benefited both businesses and consumers alike, since the use of such technology results in greater efficiencies. Indeed, the benefits offered by the wired and wireless world has resulted in 79.5% of the U.S. adult population accessing the Internet at work, home or from other locations (IT Facts, 2004, para 9).

The widespread penetration and usage of the Internet has also naturally led to the growth of e-commerce. For example, a study done by Internet Retailer found that $70 billion worth of merchandise was sold online in the U.S. In 2003 (Love, 2004, para 1). This astronomical figure is not surprising given findings that 55% of Internet users buy tickets for movies, plays, and sporting events online; 44% say that they do banking and bill paying through the Internet; and 33% claim to use the Internet to purchase everyday items (IT Facts, 2004, para 5).

The figures cited above are, in fact, expected to continue to grow with increasing penetration and usage of the Internet, accessed through PCs and various types of wireless devices, including the cell phone. One indication that this expectation of further growth will materialize is the more than tenfold expansion of online banking between 1996 and 2003; a trend that still continues. This is evident in a recent study by TowerGroup Research, which found that 22 million customers logged onto their bank accounts in March 2004, representing a nearly 30% increase from 2003. Further, the same study estimates that the use of online banking will continue to grow with 42.5 million customers or 37% of all U.S. households registering to bank online by 2007 (IT Facts, 2004, para 10).

If Information Technology has changed the way the average citizen lives, works, and plays, it has also resulted in enabling business processes to grow increasingly more efficient. This is certainly true of the financial services industry, which has benefited vastly from...

Indeed, this fact is reflected in the growth of online banking as well as the use of certain financial instruments such as plastic credit and debit cards: "Debit and credit cards overtook cash and checks last year as America's retail payment of choice. Consumers employed plastic in 52% of in-store transactions last year as debit card use surged and cash faded." (Weston, 2004, para 2)
In fact, the growing use of credit and debit cards by consumers has led to the market for credit cards in America being rated as one of the most important and dynamic segments in the financial services industry, with an already $1.5 trillion worth of transactions in 2002 projected to increase to $2.8 trillion by 2006 (Deloitte, 2004, para 1).

America is not isolated in seeing the impact of technology on business and human lives. Not only are similar trends occurring world over, technology is also contributing to creating a borderless, global economy. Thus, the penetration and use of the Internet, accessed through either the PC or various wireless devices, is a global phenomenon that is increasingly creating a highly networked world.

The role of the cell phone

Another technology device that has also clearly made significant contributions to the creation of a highly networked world is the "handy" cellular phone. Indeed, the convenience derived from the cell phone has resulted in the instrument being seen in almost every hand, with global mobile users currently estimated at 1.52 billion (CellularOnline, 2004); a figure that is further increasing almost every day.

Interestingly, although the cell phone began as a basic wireless voice device, it has quickly developed into an instrument with both voice and data capability with most handsets now Internet enabled as well. It is this versatility, which has led several telecom companies such as NTT DoCoMo in Japan, to develop plans that will transform the cell phone into a kind of remote control for an average citizen's entire life:

Like a regular cell phone, it will make and receive telephone calls. Like a regular i-mode device, it will let you send and receive email, play online games, and access any one of the 78,000 I-mode compatible websites around the world. And like other DoCoMo phones, it will take photographs, read bar codes, and play downloaded music over headphones.... But it will also contain a special chip made by Sony that lets it pay for groceries, serve as personal identification, unlock doors, operate appliances, buy movie and subway tickets, and perform dozens of other tasks." (Mann, 2004, p. 44)

Besides NTT DoCoMo, several other telecom, consumer electronic, information technology, and credit card companies are currently aggressively developing and testing devices that will deliver a similar concept, especially in the area of cell-phone-based payment systems. Such cell phone-based systems are tipped to experience a phenomenal growth since it is envisaged that they could succeed in bringing about better integration of voice and data functions, thereby negating the need for a consumer to use multiple devices. "As better devices and lower prices combine with other factors to fuel growth...smartphone shipments are set to rise dramatically over the next five years, reports In-Stat/MDR...will experience a 44% Compound Annual Growth Rate (CAGR) over the next five years." (IT Facts Biz, 2004, para 8)

No doubt, the growth of smartphones will be further fuelled with the development of cellular technology, which enables cell phones to carry out a whole range of electronic tasks. In fact, it is anticipated that cell phones or smartphones will replace the consumer's wallet and the need for current forms of plastic debit, credit, and smart cards; identification cards; all kinds of tickets; and even key cards.

Thus, it is obvious that the cell phones of the future will be in a position to deliver even greater convenience by offering a single window or remote control to virtually all aspects of life. In addition, there is ground to believe that such cell phone systems will also afford greater safety as compared to the existing plastic card payment systems, besides accelerating the growth of m-commerce and benefiting businesses, merchants, and consumers alike.

Cell Phones as electronic wallets: a glimpse into the future

As observed earlier, NTT DoCoMo in Japan is already well on the way to developing a cell phone, which it believes will function as a remote control to an average citizen's entire life. In fact, DoCoMo's plans are seen as perhaps becoming the first…