One more thing cellphones could do: Replace wallets

ByABC News
February 19, 2009, 6:52 AM

SAN FRANCISCO -- Instead of reaching for your wallet in the next few years, you'll be able to pull out your cellphone and wave it over a scanner to make a payment.

Convenient? You bet. Secure? Companies working on this new system say it is rock solid. Encrypted payment information travels through the air from the phone to the scanner. The system is based on "contactless" technology already in some smart cards credit cards and key fobs embedded with chips so they can be used instead of swiping a magnetic credit card. Chips are finding their way into driver's licenses, passports and other forms of identification, and contactless cards are used in many transit systems.

"It's relatively easy to make cellphones very secure devices," said Allen Weinberg, managing partner at Glenbrook Partners, a Menlo Park, Calif., financial services and electronic payments consulting firm. He said the encryption is "as good as or better than what you do with an ATM or at-home banking. No one is going to pick up your phone and start moving money around the world. It's just not going to happen."

The convenience of whipping out your phone as a payment mechanism is driving the transition. You wouldn't need to fumble for change at a parking meter, in a taxicab or at the ballpark.

"This is how consumers want to pay," Pugh said. "As we look at how behavior is evolving, what are the three things people take as they leave their house? Their car keys, their phone and their wallet. If they only had to take two if their phone becomes their wallet and it's MasterCard and it's secure, we think that's something consumers will want."