The Ever-Elusive Mobile Wallet: Why NFC Chips Are Overhyped And Will Underdeliver

The idea of turning your mobile phone into a digital wallet has a long and fruitless history. People are getting excited again about the prospect of mobile wallets replacing those in your pocket overstuffed with receipts and credit cards because both Google and Apple are pursuing the concept. The key technology that could make mobile wallets a reality are near field communication (NFC) chips. Google is already supporting NFC chips in Android phones such as the Nexus S and is expected to roll out tests of wave-and-pay systems at stores in New York City and San Francisco. Apple has been working on putting its own NFC chips in iPhones since at least last summer, although recent reports suggest the technology won't be ready for the next iPhone 5. There is no doubt that if Apple or Google can make NFC chips in phones a mainstream payment option, it could upend the payments industry and put either of these two technology companies smack in the middle of billions of dollars of commercial transactions. Apple could tie the mobile wallets to people's iTunes accounts, and Google could tie it to Google Checkout or some other account. But before that happens, there are a few things standing in their way: Local merchants, credit card companies, and consumer behavior.