If you've ever lost a credit card and been at your wit's end wondering where it's gotten to and who might have hold of it, then yesterday's news may put your mind at ease.
On Tuesday, soon-to-IPO (link to audio file) financial behemoth Visa and telecom ring-pin Nokia (NYSE:NOK) announced a partnership to turn the latter's cell phones into bulky versions of the former's credit cards. While it's not exactly an original idea -- Japan's NTT DoCoMo (NYSE:DCM) has offered cell phones with this capability, manufactured by companies such as Fujitsu, Sony (NYSE:SNE) Ericsson (NASDAQ:ERIC), and Panasonic (NYSE:MC) and termed the "portable wallet," for years -- this is, to my knowledge, the first such collaboration to be widely available in the U.S.
In a nutshell, the idea goes like this. Nokia adds a "near field communication" (NFC) microchip to its cell phones, enabling them to work like "smart cards." For retailers with compatible technology, a phone can therefore be used to pay for a purchase by waving the phone in the vicinity of a card reader. According to the press release, IBM (NYSE:IBM) assisted in developing the system, which incorporates technology developed by Sony and Philips (NYSE:PHG).
Wow.
Indeed. But aside from the wow factor, is this a good idea, or even helpful? Well, it depends on how you look at things. From an investor's perspective, this deal has to be seen as a plus -- as long as you own shares of Nokia (which will presumably share in a new revenue stream to which it previously had no access), or in IBM, Sony, or Philips (each of which will probably get some small royalty revenue for use of its technology). Future Visa investors may be less fortunate, though. Maybe it's just the penny-pinching technophobe in me talking, but I don't see how turning my phone into a credit card is going to make me buy things more often. Whenever I leave the house, I've got a card with me in my wallet, but the cell phone "comes with" only when I remember to pick it up. I just don't see significant incremental sales here.
From a consumer's perspective, there's obviously going to be an increased risk of identity theft by creating yet another way to lose your "card." So that's a minus. On the other hand, having lost a card, you're dependent upon the "kindness of strangers" to get it back. Put a card in a cell phone, though, and you could call the phone in hopes that the ring will tell you where you lost it. I see the use of GPS technology in phones making it easier to track down a lost phone. Basically, more pluses than minuses.
Long story short: If this deal helps anyone, it's the hardware firms, not Visa.
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Fool contributor Rich Smith does not own shares of any company named above. The Fool has a disclosure policy.
