Curtis Mason doesn't like to carry cash, which used to be a problem on the days when he didn't have time to pack himself a lunch before heading off to work at Sears Credit in Boise, Idaho. But now Mason, 23, an account manager, simply waves a wand at a vending machine, and out comes a hoagie or his favorite indulgence--a Big Ed's ice-cream sandwich.
The wand's not magic. It's just a plastic doodad smaller than a lipstick, embedded with a tiny electronic chip that is scanned by a reader in the vending machine. The reader taps Mason's credit account over the Internet and works much like a credit card--something most vending machines won't accept, along with crumpled dollar bills. Mason's wand from FreedomPay, based in Wayne, Pa., lets him eat not just from the machines at work but also at any of Boise's 31 McDonald's restaurants. Says Mason: "Now I don't starve."
This is the new face of mobile commerce, or m-commerce as it's known in the trade. And it's a far cry from the grand vision painted by promoters at the height of the tech-investing bubble. We were all supposed to be surfing the Net on cell phones with video screens and ordering everything from airline tickets to stereo gear for delivery to our homes or offices. Instead m-commerce is growing fastest in a direction that is at once more modest and more useful to a broad range of consumers and retail businesses.
More than 25 million Americans carry simple m-commerce devices like the one Mason uses to buy lunch, according to analyst David Krebs at Venture Development Corp. Most are motorists who whiz through tollbooths daily, paying their way with electronic passes attached behind their windshields. In North America, 6 million now use m-commerce to pay for gas and fast food, and their numbers are growing at 70% to 80% a year. Since 1997, 5 million ExxonMobil customers have paid for gas with just a wave from little Speedpass wands on their key rings. Phillips 66 and Shell announced their own Speedpass clones this year. Fast-food companies such as McDonald's, KFC and Taco Bell, as well as Canteen Vending, began rolling out m-commerce initiatives this year. Blockbuster and 7-Eleven are expected to follow soon.
"It's the next natural evolution in cashless payments, after credit cards and debit cards," says Robert Pons, co-founder of FreedomPay. "Consumers want to make cashless payments at fast-food restaurants, car washes, coffee shops, convenience stores and video stores--places where you typically cannot use a card." Merchants looking to speed up service and cut down on employee theft are salivating--as are credit-card companies, which have had a difficult time grabbing a share of $10-and-under purchases.
After six months of testing in nine stores in the Chicago area, McDonald's in mid-October began allowing holders of ExxonMobil Speedpass wands to use them to buy meals at more than 400 area McDonald's outlets. "Customers like it because it's quick--no slip to sign, no code to punch in. It's swipe and go," says Dave Rosales, McDonald's director of strategy and business development. In Orange County, Calif., and on New York's Long Island, commuters can even use their electronic toll passes to pay for purchases at some McDonald's drive-through windows.