Pay your way with your cellphone - cellphone based proximity payments a reality

The ubiquitous cellphone is set to become the most common payment device on the globe after cash - and. This is as a result of "proximity" or "contactless" payments enabling technology becoming increasingly prolific.

That`s the view of Chris Dewe, consumer device channel director at JSE-listed trusted transactions company, Prism Holdings.

He points out that there are numerous examples of successful 'proximity` payment systems globally - including South Africa. These enable wireless electronic communications or transactions between a device, typically a Contactless or Dual Interface Card (IE: a credit-card sized card containing a miniature Radio Frequency (RF) transceiver chip and an antenna), or Radio Frequency Identification Technology (RFID) tag or a Bluetooth or Infrared-enabled handheld, and a reader, such as a point of sale (POS) device up to 10cm away.

"These solutions demonstrate that proximity payment technology is very fast, simple, secure and convenient. The payment device remains under the control of the consumer throughout the transaction.

"Global experience to date clearly indicates that this type of payment mechanism is an ideal substitute for the cash transaction, as the solution is well suited for micro-payments, particularly where speed is an issue such as at fast food outlets, petrol stations, parking garages, road toll plazas, convenience stores, supermarkets and movie theatres. They could even be used at automatic vending machines, as is the case for the London Underground and Hong Kong`s Mass Transit Railway. These mechanisms are ideal in public transport systems where commuters generally pay cash for their tickets," he says.

However, Dewe points out that most 'proximity` payment systems today require a stand-alone card or tag.

In developing countries like South Africa more people have cellphones than have bankcards and technologically, the mobile phone has the capacity to handle proximity payments. Indeed, VISA believes the mobile handset will be the most important domain for contactless payments, MasterCard is already testing the technology and cellular handset manufacturers like Nokia are developing phones with payment-type capabilities," he adds.

For example, the Nokia phone SmartCover is embedded with a contactless chip and radio frequency (RF) circuit. The chip is pre-registered with the owner`s payment account information. This information can then be submitted via RF when the consumer holds the handset within close range of specially equipped readers.

According to Dewe, despite the growing use of proximity payment, there are still some technology issues which have to be resolved. These relate to standards and security - particularly with regard to interference with radio frequency transmissions.

"Most of these issues are likely to be resolved soon. And within the next few years, don`t be surprised to see people paying for all kinds of good and services with their cellphone handsets," he concludes.

Examples of successful 'proximity` payments systems include:

* Exxon-Mobile`s Speedpass: this has been deployed across the US; it uses an RFID tag; and it enables a quick, convenient and secure means of paying for fuel at petrol pumps.

* OTI Fuelmaster: this has been deployed in South Africa and other countries in Africa; it also uses RFID technology and what`s known as an OTI smart key fob or tag.

* Octopus: Hong Kong`s Octopus Card was originally designed for the Mass Transit Railway (MTR), the city`s extensive subway system. In addition to the MTR, the Octopus Card works on all the other parts of Hong Kong`s mass-transit system as well. All commuters have to do is hold their card over a scanner, wait for the beep, and that`s that. No fumbling for coins or notes.

* Oyster: London Underground`s equivalent of the Octopus Card. The Oyster card stores information about the validity of the ticket - Travelcard, Bus Pass, LT Card, freedom pass or staff pass.

* DoCoMo, Visa International, Nippon Shinpan, OMC Card and AEON Credit in Japan started trials in June 2003 of a service for making credit card payments at bricks and mortar merchants via DoCoMo 504i and 504iS series mobile phones, which are equipped with infrared transmission (IrDA) ports. The trial leverages a DoCoMo "i-appli" application for payments based on the "Visa Proximity Payments Messaging Specification" which are made using credit card data that is downloaded and stored in the cellphones. These can then exchange payment information with other IrDA-equipped devices via an infrared signal.

* SK Telecom: in South Korea, SK Telecom and Visa have collaborated to deploy both contactless smartcards and infrared payments from mobile phones. As in the DoCoMo pilot, the mobile phone implementation uses the Visa Proximity Payments Messaging Specification. This system is based on an ICC (integrated circuit chip) card which is slotted into the mobile phone.

* MasterCard`s PayPass: the most significant proximity payment project to date. It`s a allows consumers to simply tap or wave their payment card, or alternative PayPass form factor, on a specially equipped merchant terminal, eliminating the need to swipe a card through a reader. In Dallas, Texas, MasterCard worked with Nokia to incorporate MasterCard PayPass into mobile phones. The Nokia phone SmartCover was embedded with a contactless chip and a radio frequency circuit. The chip was specially programmed with pre-registered MasterCard payment account information.