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Technology competition taking place for mobile payment supremacy

Feb 11, 2013 Dave King

Any time a new product captures the public's imagination, it's sure to generate competition among manufacturers trying to come up with a version of their own. Mobile wallets are no different.

Near field communications (NFC)-based smartphones and those connected to cloud technology are now in stiff competition for the increasing use of smartphones to make electronic payments with prepaid ACH cards, debit and credit cards.

As mobile payments become more mainstream, businesses and consumers will decide which method works best for them, according to Laptop Magazine. The principal difference is how the payment data is stored.

With NFC technology in Google Wallets, users tap their mobile device to a credit card terminal and the payment is instantly transferred from their card or a checking account to the retailer.

Cloud-based wallets store one's banking information in the cloud and are accessed by a smartphone, tablet or laptop in the same way that any cloud-stored information is retrieved. Well-known brands include PayPal and Square, and many stores that accept a digital wallet app require the confirmation of the phone number at the point of sale terminal to allow the payment to go through.

Where the competition stands
Right now, cloud-served mobile wallets are becoming more popular because the funds can be accessed from anywhere. The problem for NFC-fueled models is that  many merchants aren't yet equipped to accept payments from them. Gas stations and grocery stores are most likely to have tap-to-pay terminals.

"When you talk about secure elements and hardware-based digital wallets, it seems that is still an area of focus for the mobile carriers and/or device manufacturers," Rick Oglesby, senior analyst with Aite Group, told Laptop. "But the rest of the market seems to be going away from this toward cloud-based solutions."

It's not that NFC doesn't have support in the carrier industry. ISIS technology is aligned with most of the major U.S. carriers, such as AT&T, T-Mobile and Verizon Wireless. But only certain banks are signed on to allow purchasers to make payments through their accounts.

Denée Carrington, senior analyst with Forrester Research, told the magazine that it's likely to take three or four years before NFC-run mobile payments will be widely accepted in the marketplace. The technology's selling point is that it is more secure with a combination of hardware and software to foil hackers.