When were you first told that someday soon we’d all be using mobile phones for payments and other services? A decade ago? And yet here we are today, still looking forward to when banking customers can pay for a package of Twinkies with a wave of their smart phones.

Why the delay? The problem isn’t technological. The technology behind the idea – near field communication (NFC) – has been around for years. In fact, there are 25 million NFC-enabled phones in use today in Japan. Nor is the problem point-of-sale infrastructure; many retailers, including CVS and Best Buy, are now equipped with NFC-compatible payment terminals. Some observers blame the delay on the scarcity of commercially-available NFC-enabled mobile phones, but that situation is changing, with several models expected to hit the market early in 2011.

One of the biggest reasons for the lack of “e-wallets” in our pockets is the complexity of the business models, particularly here in the U.S. Even a simple NFC mobile payment business model involves chip makers, handset manufacturers, banks, credit card issuers, mobile network operators, and often government organizations – all of which have their own interests (which can sometimes conflict) and require a way to make money in the process. Japan has progressed further because it is a smaller market with fewer players.

Despite the delays, interest in e-wallets has not diminished. In fact, we are seeing a surge of activity in products and services that offer limited NFC-like capabilities. Companies such as First Data are offering prepaid contactless tags that consumers can stick on their phones and use to “wave and pay” at certain stores. Visa is testing mobile phone memory cards with built-in NFC functionality. While these interim approaches fall short of full NFC, they may help to both stimulate consumer interest and push the factions within the NFC “ecosystem” to work out the kinks in the U.S. business model.

Recently, yet another wrinkle appeared when Apple filed a patent application for a future iPhone. The illustration included with the application featured an iPhone sporting an “N-Mark,” the consumer symbol used by the NFC Forum, the industry consortium that advances NFC technology. A major commitment to NFC from Apple could be the accelerant that ignites the NFC market.

In the meantime, what’s a bank to do? Unless you’re willing to capture a first-mover advantage at any cost, our recommendation here at ADS is to continue watching the developments and weighing the pros and cons but be ready to move quickly when the winds of change reach hurricane force.As much as industry analysts may disagree on what the road to full NFC will look like, virtually all of them concur that the journey is inexorable and the final destination is clear.

At ADS, we see the growing use of smartphones and the popularity of “apps” as further proof that consumers will want their mobile phones to be the primary channel through which they interact with all aspects of their lives, including their banking and purchasing behavior. As the e-wallet comes closer to reality, we are building on our expertise in mobile and Internet banking to work with our customers to ensure that their mobile banking and payment solutions are robust, well-integrated with existing systems and secure.

Connect with us today to see what value ADS Financial Services Solutions can add to your organization. Learn more about ADS Financial Services Solutions at www.adsfs.com or email peter.cahill@adsfs.com to match you with the correct ADS resource for your needs.