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Wallet phones are pioneered by NTT-DoCoMo, combining a multi-application smart card with i-Mode phones. Wallet phones can be used as prepaid electronic cash, tickets, access control cards, authorizations to access corporate networks, membership cards for clubs and loyalty programs. Information, like remaining electronic cash balance, or transaction records can be directly read offline by the cell phone. Wallet phones can contain credit cards; entrance, train or air tickets; and employee ID cards.

Mobile wallet works on the same concept as credit cards. Basically, your credit card will now be stored in your mobile phone. The biggest benefit of this technology is that you do not need to carry a bulky wallet any more. The other benefit is that unlike a credit card, you can check information stored in the device at any point in time, on the very same device. You can start using a new credit card immediately after it has been issued. No physical delivery of the card is required, everything happens online. In India, like other places in the world, mobile telephony is becoming less about voice, and more about VAS and revenue generating applications. In the coming years, applications will drive mobile business. With smart phones having considerable computing power, users would want much more out of their devices than just to be able to talk or download ringtones.

With the Indian market growing exponentially, expected to touch 500 mn mobile phones by 2010 the potential for mobile applications is limitless. IRCTC, Visa, ICICI, Bharti etc are already taking steps in this direction.

Technology Target
Telcos and technology providers in the nascent Indian mobile payments scenario are focusing upon three broad technology concepts. They are essentially:

Contactless IC technology: Already in use in the Delhi Metro tokens and cards. It supports multiple uses and is also being used in mobiles to create mobile payment gateway. It works the same way as metro tokens-just flash your mobile in front of the reader and payment is made.

Pre-recorded voice responses: IVR takes a user through the various steps in a financial transaction. Human intervention is minimal but transaction times are very high.

Java applications working via GPRS: Machines do the talking between phones and back-end servers using GPRS. There is no human intervention. Transactions are completely secure and very fast.

SMS-based applications: Transactions travel over the air via encrypted SMSes. Authorization codes are also exchanged using SMSes. SMS as a medium might be extremely susceptible to security risks.

Apart from the above categories, other technologies being explored are WAP-based applications, NFC (Near Field Communication) and USSD protocols. NTT DoCoMo launched 'i-Mode', a WAP-based solution in Japan and it has been a huge success. Similarly, NFC phones are being used in a pilot conducted by Discover Financial Services in the USA, powered by C-SAM's technology. But the verdict on which technology will rule the roost is not out yet.

Costs, of Course
The costs are involved first in developing, patenting and then propagating the technology. Then, convincing major stakeholders such as banks, telcos and merchants to buy into the idea which has the potential to fundamentally alter the way India transacts and the way Indians understand money, financial transactions and banking. End-users may also need to be subsidized for using GPRS, since monthly fee, downloads and transactions will result in revenue volumes for the telcos.

For the mobile wallet to gain cross-industry traction, it would require all major stakeholders to first understand its potential, recognize its revolutionary nature and agree to support it as a new tool of "any-time, anywhere payment" system. Witnessing the growth happening in retail, and being one of the two fastest growing mobile phone markets, India will see increasing adoption of this technology. In fact, like elsewhere in the world, it is just beginning to gain momentum in India and the required ecosystem is taking foundation.

Nilabh Jha
neelabhj@cybermedia.co.in