Red Tape, Greed Blocking Widespread U.S. Mobile Phone Credit Card Transactions

In Japan, paying for things with a wave of a cell phone is old hat. Clothing, food, movies, loose women—you name it, they've bought it using a phone. Americans? Not so much. Here's why.

The short answer is "red tape." There are simply far too many entities, players, middlemen and suits that each want a piece of the pie to make such a system practical in the U.S., for now. Indeed, popular and proven programs already exist in some major cities, like Atlanta, New York and San Francisco, but the effect has yet to grow into anything we could seriously call "critical mass."

In Japan however, the New York Times reports that the major players simply said, "this is how it will be" in the early stages, and moved on from there. The result is that a single carrier, NTT DoCoMo, accounted for more than half of the Japanese market from the moment of inception. Their leverage as the majority player "motivated" the system to take off among the financial institutions and handset manufacturers, but I have a hard time believing such practices, anathema to U.S. capitalism, would ever take hold Stateside.

Still, the same technology driving drive-by Japanese cell phone purchases in Akihabara is still managing to leak into other countries, albeit in different form factors. In London, for example, the Times reports that "Oyster" cards used for transportation feature the same Near Field Communication (NFC) short-range tech as Japanese phones. In the U.S., MasterCard's PayPass terminals allow consumers to wave their card instead of swipe it.

But these outlets only allow one CC# per card. Japanese phones, the nirvana of drive-by transactions, allow users to select from several accounts, and use the one they want.

The obvious fraud and theft issue is also addressed in the article ("safe" say experts), although with all the big time ID theft stories we've seen this past year the stigma will remain regardless of how many Kevin Fu's there are saying mobile phone transactions are A-OK.

Fu is an assistant professor of computer science at the University of Massachusetts, Amherst. His claim to fame is discovering a huge security hole in PayPass-type credit card transactions in 2006. His research led card companies to overhaul the system and institute fixes over the past three years.

One upside of this discussion (if you're in the pro-cell phone CC camp) is that MasterCard has already come out and said there will be no additional fees for these transactions, should they see a massive deployment. Of course, we're in the middle of a huge global recession right now, so we'll see if the credit card industry, often criticised as synonymous with the phrase "hidden fees and finance charges" will keep their promise.

If you're a betting person, the magic date for cell phone credit card transactions is 2012, when Key Pousttchi, head of the Wi-mobile research group at the University of Augsburg in Germany, says NFC tech will be in pretty much every cell phone on the market (and netbooks? Or will they have converged with cell phone by then? The article doesn't say).

Now, call me a Luddite traditionalist all you want, but I still don't mind reaching for my wallet. The moths that fly out of it when opened, well, that's another story. [New York Times - Thanks, Matt!]

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