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Mobile Payment Options Emerging

Mobile Payment Options Emerging

As the idea of online payments using services such as PayPal becomes more common, service providers and software companies hope to expand the concept to wireless phones.

Although personal mobile payments are in the early stages in the United States, it won't be long before the idea of using your cell phone to make small purchases or to send money to your friends becomes as commonplace as handing over cash.

As consumers gradually shift more and more of their purchases from cash to debit and credit cards, using account information stored on your mobile phone is expected to become a popular payment alternative.

In early 2010, mobile transactions account for about 2 percent of all purchases made in the United States. That percentage is expected to reach 20 percent over the next three to five years, according to the Electronic Payment Association.

Mobile payments are likely to emerge in two basic forms. Some providers will use your mobile phone's screen as a payment device, using a symbol like a bar code that merchants can read with a scanner. Others will use small contactless chips that are embedded in mobile phones (or attached with small stickers) that consumers would hold near a scanner (much like soda machines that can read and accept credit card payments).

In both cases, your purchase would be linked either to your phone bill or a credit card account.

Advocates say mobile payments can significantly change how consumers use and view money. In addition to using mobile phones to pay for routine retail purchases such as coffee or lunch, consumers will also be able to send each other small payments to divide a meal tab or to settle a friendly wager.

To prepare for the pending arrival of mobile payments, a number of leading retailers, including Hess gas stations and convenience stores, Home Depot, Sports Authority and others, are upgrading their point of sale equipment to accept payments from mobile phone chips.

Starbucks outlets are also accepting payments using smartphone applications that connect a user's mobile phone with a stored-value card. Consumers hold their phones up to be scanned, and the purchase is deducted from their card balance.

To protect consumers against fraud or the possibility of someone stealing their phone to makes lots of purchases, mobile transactions will use secure encryption and will require users to enter passwords or PIN codes for every transaction.

Some banks or wireless providers may also set limits on the size of purchases, or on how many mobile payments consumers can make in a day, to reduce the risk of mobile payment fraud.

Once the technology, security and payment details are worked out among handset manufacturers, banks, wireless carriers and retailers, mobile payments will emerge as a common and popular alternative to cash and debit cards.

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