The smart phone, that Swiss Army Knife of the digital age, is liberating pockets around the globe from cameras, calendars, maps and music players.
Could the wallet be next?
Businesses like Bling Nation and eBay Inc.'s PayPal division are rolling out products that allow people to hand over money to stores, restaurants, coffee shops or friends with the tap of a mobile device. No credit cards, checks or cash are necessary.
Meanwhile, reports suggest that other major companies, including Apple Inc., AT&T Inc. and Verizon Wireless are planning or negotiating to provide similar services.
"What I see is all these distinct initiatives coming together and merging at some point in the not-too-distant future," said Aaron McPherson, practice director at IDC Financial Insights. "All together, they add up to significant change."
Bling Nation, a Palo Alto, Calif., startup founded in 2007, is among the furthest along in this emerging field, with more than 1,000 retailers nationwide accepting its payment system.
The company provides so-called Bling tags, or small stickers, that affix to the back of a mobile phone and transmit data using a wireless standard known as "near field communication."
When users tap the tag on a proprietary reader at participating retailers, it pulls money from their PayPal account. For security, users have to enter a personal identification number for purchases over a certain amount, or when transactions occur at an unusual frequency or location.
Merchants pay for or rent the reader and are charged 1.5 percent of the total of every transaction, which is well below the average transaction rate for accepting credit cards.
The additional advantage for merchants is that they can analyze customer data in a more fine-grained manner than is permitted through the credit card system. This allows them, for instance, to target sales offers to regular customers or those who haven't been into the shop in a while.
"They enjoy cheaper fees and analytics that can help them issue coupons and make more money," said co-founder Meyer Malka, adding that the advantages are turning businesses into proselytizers on Bling's behalf.
A little more than a month ago, the company began an aggressive push in partnership with PayPal to expand its footprint in downtown Palo Alto. It included giving away thousands of tags preloaded with $20 in credit to customers. There are now more than 50 retailers in the city accepting the payments.
Live Greene, an eco-friendly home-goods store, has been using Bling for several months. Owner David Greene said he hopes it will help him generate more repeat business and draw in additional customers among smart-phone-toting Stanford students, though it hasn't made a notable impact to date. The immediate benefit has been the cost savings.
"I love that the transaction fees are less than credit cards," said Greene, 44, of Menlo Park, Calif. "It's lowering transaction costs, which means it's boosting my profits."
PayPal has been a pioneer in the mobile payment space, offering users the ability to exchange money through their accounts via text messages since 2006. Its recent mobile applications for Apple's iPhone and Android-based smart phones includes "bump" technology that allows people to trade cash by doing exactly what the verb suggests with the devices.
PayPal's mobile efforts are a big part of the company's plan to extend its popular online payment tools to the offline world, where the vast majority of commerce still takes place, president Scott Thompson said.
Other companies are also eyeing the opportunity.
Apple Inc. recently tapped Benjamin Vigier as a product manager of mobile commerce. His long resume in Near Field Communication at mFoundry and SanDisk Corp. has prompted wide speculation that a forthcoming version of the iPhone might integrate the so-called contactless payment technology.
Similarly, AT&T, Verizon and T-Mobile USA are in talks to conduct pilots of wireless payment chips embedded in phones in four U.S. cities, according to a Bloomberg story earlier this month that cited three people with direct knowledge of the plan.
In addition, a number of companies have attacked the mobile payment problem from the acceptance side, by enabling some smart phones to read traditional credit cards.
All mobile payment technologies face obstacles to wide acceptance, including the challenge of getting people comfortable with paying in a new way, the unique security considerations posed by a device that many have left in the back of a taxi at one point or another, and the fact that the vast majority of retailers don't have readers in place to accept these near field communication payments.
"It's still somewhat up in the air which model and which players will end up having the right fit ultimately for the market," said Beth Robertson, payments director at Javelin Strategy & Research.