Are NFC and smartphones-as-credit-cards dumb ideas?

Since way before the iPhone was a gleam in Steve Jobs's eye, back when the Motorola RAZR was the mobile phone du jour, financial institutions, mobile handset makers and carriers have dreamed of turning your cellphone into a mobile wallet, to use your smartphone the same way you use a credit or debit card.

Finally, this year we may finally reach this near field communication (NFC) nirvana, of simply waving our smartphone over a retail payment terminal instead of a credit or debit card to pay for our copiously consumed commodities.

There's only one problem. Using your smartphone as a credit or debit card replacement may be more trouble than it's worth.

To replace your credit or debit card with your phone you need a smartphone with an embedded NFC chip, a version of Android that includes NFC support (at least v2.3) and a mobile wallet app from your local bank, backed by either Visa or MasterCard.

Right now there are fewer than a dozen smartphones thusly NFC provisioned, mostly from Samsung (as well as Nokia and BlackBerry — gosh, remember them?).

But according to Visa president John Partridge, whom I had a chance to chat with last week at the spring CTIA show in New Orleans, the number of NFC smartphones could jump to 90 within the next year, and may include the upcoming iPhone 5 this fall.

But what the NFC crowd fails to take into account is not technology, but human behavior.

How Do You Shop?

How do you pay for goods at a store? After the clerk totals up your purchases and gives you the bad news, you likely pull out your wallet, pull out a credit or debit card and then hand it over or slide it yourself through the slot in a point-of-purchase terminal.

Using your phone as a credit card replacement is supposed to be as easy. But it's not.

To use your phone to pay, you have to wake it up, which likely entails you inputting a security code. Then you have to find and boot the payment app. Then you have to input your passcode in the payment app. Then you wave the phone over the payment terminal.

Doesn't that sound easier than just swiping your credit card?

The demo apps I saw last week at CTIA offered options to make the process less passcode-input friendly, mostly by eliminating the need to input the payment app passcode. Losing your phone is already more common than losing your wallet. By eliminating this essential security step, losing your phone could now be worse than losing your wallet.

Given this NFC payment rigmarole, I'm having a hard time trying to figure out why everyone in the financial and handset industry seems to think using your phone as a credit or debit card replacement is a good idea.

Well, not everyone. But we'll get to that in a minute.

NFC Advantages

Consumers choose convenience over every other consideration where technology adoption is concerned, and NFC will be no exception.

For instance, many credit and debit cards also are NFC enabled. I have one. I've tried waving it instead of swiping it. Like a wired vs. wireless connection, I just feel more confident my card will be identified and the transaction transacted more efficiently by swiping rather than waving.

NFC-enabled smartphones add the inconvenience of app-opening and passcode entering. For this reason, I can't for the life of me figure out why anyone would opt to use an NFC smartphone instead of a card.

What banks and retailers hope to do is entice you with smart extras — coupons you can redeem immediately, store specials you are alerted to when you come into the store, and a plethora of loyalty programs.

But your phone doesn't need to replace a credit card to take advantage of this and other smartphone-based shopping bonuses. At least that's what MasterCard thinks.

Smartphone As Smart Store

Instead, of paying WITH a smartphone, MasterCard wants consumers to pay ON a smartphone.

According to MasterCard, many people browse in online stores on their smartphones, but fewer than 1.5 percent of us actually check out and pay on their smartphones.

Why? Using that tiny screen and tiny keyboard to tediously fill out the tiny name/address/credit card number particulars isn't ideal. Plus, I suspect sending this sensitive personal and financial data over the cellular air from potentially unknown shopping sites makes many of us uncomfortable.

So MasterCard is creating a raft of trusted mobile wallet services. Just click on the PayPass payment option, and all your previously-stored-with-MasterCard credentials are filled in for you.

Even though Visa is pushing NFC more vigorously, its payWave mobile wallet imprimatur also enables this idea of smartphone-as-checkout-counter.

One of the more compelling pay on/by smartphone scenarios is grocery shopping. You go through the aisles and scan the bar or QR code of each item as you add them to both your physical and virtual cart, and maybe be alerted of a coupon on that item. Once you've completed your run, simply tap "check out," then bag your goods and head for the car and home — no more waiting in checkout lines with surly clerks.

I'm not saying this scenario is imminent, but it and other innovative uses of the smartphone as a e-shopping platform makes more sense as a possible future for the mobile wallet than NFC does.

We told you our thoughts; now we want to hear from you. What do you think: does NFC make enough sense that you're ditching plastic, or does paying through an app sound like the better deal? Let us know in the comments below.

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