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Last updated: Tuesday, November 18, 2008

Satoshi Tada pays for his purchases, wins free food and gets store discounts all by waving his mobile phone. “I use it pretty much every day,” the 25-year-old Japanese office worker said. “You can charge money on it right there if needed, and you don’t have to run around trying to find an ATM. You can even get points because it’s linked to credit cards.” Companies like Visa and Nokia, the world’s leading maker of cellphones, are still mostly testing phone use for payments, but in Japan, more than 50 million people, or about half of all cell phone users, already carry devices capable of serving as wallets. Users of wallet phones just wave their phones in front of a scanner at a cash register, and the price is either deducted from a prepaid account or charged on credit for post-pay services. When the phones are used for things like transportation, users wave their phones at an electronic reader by the gate. The phones can also be used as keys to unlock doors. Japan has pioneered not just the technology but also the business models that will pave the way for wallet phones to become a standard payment method. About 700 million people worldwide are expected to own such phones by 2013. “You can’t deny that having such applications on a phone is convenient, and that will likely be the way that mobile phones are going worldwide,” Hironobu Sawake, an analyst with JPMorgan Securities, said in Tokyo. Success in Japan and in trials elsewhere have shown that the technology is ready for cellphones to replace credit cards, cash, tickets and keys. But there are hurdles. Companies must find ways to break the psychological barrier for skeptical consumers and they must design new business models as the lines blur between banks, financial institutions and cell phone companies. The…

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Coming to a Back Pocket: The Wallet Phone

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