Cash, Checks, Credit cards,... Telephones

Recently I have been asked what would come after credit cards. First second I was a little shocked with the question, especially as I was just going through a wallet with several of them in it. Why would we need something else? Aren't credit cards fine? To be honest I do not miss any functionality here - the cards just work. I can pay almost anywhere in the world with a piece of plastic, linked direct or indirect to the bank account. Security? Well may be this is an issue, but if it was a real issue, we would have done something about it already.

So I was silent for a few seconds after the question was asked trying to figure out the answer. And then I looked at my mobile phone. Yessss! It is so simple. It will be my next credit card! Then I even reminded myself I blogged on the subject half a year ago :) But it is worth to bring back the conclusions. Mobile phone, evolving towards a personal teleputer, is really going to be the only thing we carry with us. As it becomes a universal (voice and video and text) communication device, a camera, a media player, there are more and more reasons to carry the phone with you. There is a paragraph on using a phone as a method of authentication in the post I refer to above. So It won't be long when you start a car with a push of a button. The car will check for the presence of the phone over some Near Field Communication technology and the immobilizer will let the engine start when it successfully authenticates the owner via the owner's mobile phone. So the keys will be another thing of a past, to be left at home.

Credit cards will eventually disappear the same way as car keys. A personal mobile phone will take over the authentication function. The fact is, simplifying things a bit, authentication is the only function of a credit card today. The card does not pay a bill. It is your bank who pays. With a card you authenticate yourself to the bank and with a signature you authorize the bank to transfer the specified amount of money to the seller. So if a phone can authenticate you to the car, there is nothing to stop it from being used to authenticate you to the bank. A phone also has two important attributes credit cards miss - a display and a keypad. So there can be a dialog. You wave the phone over the cash register, and at this very moment you are authenticated to the bank. To improve security the bank may ask you to enter a PIN on your phone's keypad (your personal keypad). Then the amount you are about to pay shows on your phone's screen with a prompt to confirm the charge. There are a number of ways to improve this scenario later. Like biometrics - a touch of a finger instead of a PIN. But even the basic one is going to make the credit cards obsolete. Why carry car keys with you, why carry a wallet, when a phone is just what you need?

In parallel, banks are experimenting with full mobile banking over the phone. Not just payments, but full home banking - account management, fund transfers... There is a good article on the subject on CNBC website: Banks Go Mobile.

Just wonder what Alexander Graham Bell is thinking of the way his invention develops.... And AT&T 100 years ago probably did not envision itself being a bank... Well it is hard to predict, especially the future :)