The High Cost Of Paying By Phone

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At the counter of a coffee shop in San Francisco, I whipped out a smartphone, launched its Google Wallet app, tapped in a four-digit PIN, waited for the program to report it was ready, held the phone up to a Google Wallet reader, and saw "Authorizing Transaction" appear on its screen. That's when the alleged future of mobile payments got seriously awkward.

As in, nothing happened. After a moment, the guy behind the counter realized what I'd tried to do and said the reader wasn't working.

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Thus thwarted, I resorted to a different cash-free transaction: I let the editor accompanying me pick up the tab.

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That's not how things were supposed to work for "contactless" payments beamed from the NFC (near-field communication) chips in new smartphones. You'd have quick, secure transactions on a device you already take everywhere, with the added advantage of getting discounts and frequent-customer rewards sent automatically.

Yet about a year after Google launched its Wallet NFC service, little has changed. Google Wallet remains confined to seven Android phones, all but the unlocked Galaxy Nexus on Sprint or its Virgin Mobile subsidiary. And Wallet still only connects to Citi MasterCards; without one, you must prepay into a separate Wallet account, although at least Google starts that off with $10 credit.

AT&T, T-Mobile and Verizon Wireless, meanwhile, have set up a different NFC system called Isis. It will work with the same NFC terminals as Wallet (an app that Verizon saw fit to block from its Nexus) and link to more credit cards. But its launch sometime this summer will initially stop at some merchants in Austin and Salt Lake City.

So for now, NFC means Google Wallet. And it's been kind of a pain.

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In a second attempt at a CVS, the Wallet app worked, but it would have been faster to swipe a card. CVS spokesman Mike DeAngelis didn't say how many NFC transactions it's processed since it began taking contactless payments in 2005.

A few days later, the Wallet app on a loaner Sprint HTC Evo 4G LTE complained that it had "not yet been certified." Google and Sprint reps e-mailed that the companies are working to fix an unspecified "software issue."

In the meantime, the credit card just works. And it keeps getting better, as smartphone and tablet-connected card readers like those from Square, PayPal and others let even the tiniest merchants take plastic.

The discounts and rewards NFC can bring look more likely to come through social-media services and apps–with a big boost likely to come from the Passbook feature in Apple's upcoming iOS 6.

The last, best hope for NFC payments may be in transit (PDF):  Subway turnstiles don't accept credit cards. And although stored-fare smart cards such as Washington's SmarTrip and Boston's Charlie Card eliminate fussing with paper fares or tokens, at best they work on one region's transit systems.

But earlier, limited NFC tests by the MTA in New York City and Bay Area Rapid Transit, among others, have yielded few ongoing deployments. (Update: Note that small transit transactions don't require opening an app or tapping in a PIN.) New Jersey's NJ Transit, for example, only accepts NFC payments on one rail line and six bus routes.

And while transit agencies continue to plot their move to NFC (as the Metro in D.C. plans), people still need to get around.

My next stop in San Francisco after that failed attempt to pay for coffee? A drugstore where I added yet another incompatible smart card to my collection: a ClipperCard to pay for BART to the airport.

Credit: Rob Pegoraro/Discovery

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