Settling your tab without a wallet
Dynamics Inc. is building tiny computers into your plastic. This card lets users type a in security before making a purchase, and without that code the credit card number and all the information on the magnetic strip on the back disappears.
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Kai Ryssdal: As we sit here in the early days of 2011, we have the entire Internet at our fingertips. We can stream full-length movies to the wireless device of our choosing. We can sit at home on the living room couch and point and click and shop for almost anything we want. And yet when we run down to the corner store for a quick errand, when it comes time to pay, we have to whip out the actual plastic.
Credit card companies make more than $50 billion a year from the transaction fees they charge merchants when we use our cards, online or in person. That's a lot of money. And some big name technology firms, from Google to AT&T, would love to get a slice of it.
Marketplace's Steve Henn reports.
Steve Henn: Millions of Americans use the personal finance web site Mint.com to create budgets and manage their money. Aaron Patzer invented it. In two years, he built the site into a $170-million business. But there's one aspect of managing his money that Aaron says is still a royal pain in the... well, you know.
Aaron Patzer: I'm sitting here uncomfortably in this interview with a big chunky wallet in my pocket.
It's 2011: Google's built a self-driving car, new freezers send texts your cell phone if the meat's going bad. And Patzer wonders why the old-fashioned wallet still exists.
Patzer: There is no reason that you need to carry around as many cards as you do just to have the information that's on a magnetic stripe. If you want do it in a very secure way, you could eliminate all of that. It would be a much more comfortable world to live in.
Lots of us are already half way there. We have a smartphone. And think, if you started paying with it your phone, it could automatically warn you when you are going to overdraw. It could tell you what card to use, even guide you to the best deals on soap. And all this technology already exists.
A few weeks ago I walked into the Cheeky Monkey, a toy store in Menlo Park, Calif. I needed for party favors my seven-year-old's birthday and I was in a hurry.
Clerk: Here's are our tub of erasers. We leave them all mixed together, 'cause the kids can go on a treasure hunt.
When it was my turn to pay, I reached for my phone. It has little sticker stuck on the back. And that sticker, made by a company called Bling Nation, has a chip in it that basically can replace my bank card.
Clerk: Tap it onto the little machine here and then it automatically comes out of your account.
Start-ups like Bling and Isis, which was founded by the nation's biggest wireless carries, are gunning for the credit card companies. Visa and MasterCard charge merchants fees every time any customer swipes their plastic. And each year, they make billions this way. The start-ups's plan is to undercut the big guys by charging merchants less in swipe fees, and they'll use chips on your cell phone or inside it to replace your plastic.
Before any of these systems will work though, stores will have to equip their cash registers with new gadgets that can read the chips. Jeffery Mullens runs Dynamics Inc., another start-up that wants to digitize your wallet.
Jeffrey Mullens: It would cost hundreds of billions to change the magnetic stripe infrastructure in the United States and reeducate the merchants that use it.
In the mean time, Mullens is taking a different approach. Instead of trying build a credit card into your phone, he's building tiny computers inside traditional plastic cards. One smart card from Dynamics lets you chose among your different accounts. Or...
Mullens: For the loyalty-oriented consumer, Citi just announced the prestige 2G card which has two buttons: One button to pay for your purchase with credit, and for the first time ever, now you have the ability to pay for your purchase at your point of sale -- at your gas stations, at your Apple stores, with your reward points.
And no matter what technology takes off -- whether it's computerized credit cards or smartphones that can pays your tab -- chances are it will also be intelligent enough to steer you away from high credit card fees.
Omar Green: That's the problem we want to be solving: How do I get something in my phone that says, "Don't use this card; use this other card"?
Omar Green runs mobile strategy at Intuit, the company that bought Mint.
Omar Green: There are potentials for us creating really really smart systems that are smarter about your money than you are.
That potential that haven't been realized yet. Back at the Cheeky Monkey after waiting and waiting for my charges to clear on my phone...
Henn: Why don't I go ahead and pay with a old-fashioned plastic card?
Or maybe I could even use cash.
In Silicon Valley, I'm Steve Henn for Marketplace.