They used to say “be careful what you wish for”. Now it’s be careful what you “tap” for. Shopping is quickly becoming as easy as tapping your phone at the checkout counter.

Imagine this scenario:  You’re walking past Bloomingdales.  They know you love DKNY because of your previous purchases at the store; they know you’re in the ‘hood because of location-based technology in your smartphone. So, they spring into action and pop off a text message offering you 30% off on the new black sweater you’ve been eyeing. You’re late to work, broke, and now stuck in the horns of a dilemma. To shop or not to shop.

That’s the new reality as Near Field Communications (NFC)-enabled smartphones enter the fray. Near Field Communications technology can transmit secure data over short distances, so your phone can talk to their cash register.  Pundits agree that NFC-based mobile payments will total over $750 billion worldwide by 2015, and many predict they will soon begin to replace a typical credit card transaction.

Buying something is as simple as tapping your phone against the cash register. And it doesn’t stop with the purchase of an item. Your phone stores your transactions and can mind your budget. Your loyalty points are accrued. You get to choose your preferred method of payment. The whole thing snowballs and eventually shopping offers, frequent flier miles, loyalty cards, gift cards, and more will all stored on your phone. Hopefully it will be the tidiest wallet in the world – freed of dozens of credit and loyalty cards in your pocket.

On the vendors side, it means being able to reward customers for shopping with them by understanding a shopper’s history and targeting their preferences. It also means upgrading the vendor’s current payment systems to accept mobile payments, but the movement is happening, and quickly.

The three technologies I’ve been watching are Google Wallet, PayPal and Square. They’re dominant at moment, but others are flocking to the space including large organizations.

Google Wallet is available today from Sprint on the Nexus s4G. It supports Citi MasterCard or a virtual card that you load up with any of your credit cards.  While the choices of handset, carrier and credit cards supported are certainly limited today, Google wallet can replace bulging physical wallet’s offers, loyalty cards, and credit cards.   In my NYC area stores like Gristedes, RiteAid and RadioShack are already accepting Google wallet payments.  To pay all you need to do is tap your phone against the POS cashier.  Your wallet is locked with a special pin code for security.

PayPal recently announced a similar service that will be available after the first of the year. Like Google wallet, you tap your enabled phone up against any equally-enabled POS. The demonstration that I saw in NY at Paypal’s showroom showed a few really cool extras. For one, if you’ve bought something with your VISA card but realize that your balance is getting low, you can simply transfer the purchase to another card. It’s not quite a “buyer’s remorse” option but at least you can make sure your bases are covered. You’ll also be able to comparison shop online, and receive special offers from stores that know you and your purchasing habits. Buy a Weber Grill for instance and the next time you walk by the store you might get an offer for cedar chips or a nifty BBQ set sent to you via text message. Not hedging its bets, PayPal is also launching a credit card that’s sort of a like a pocket full of credit cards.  A single PayPal card can hold information about all your cards, and all you need to do to enter one of your cards is take a picture of it with your phone’s camera or read the bar swipe.

What’s most interesting to me about Google Wallet and Paypal is not so much the technology provided, but the convenience of buying at retail is greatly enhanced.  Walk by your favorite lunch joint, and get the discount of the day. Store up your loyalty points with your hairdresser or grocery store. If the offers are relevant and service is good, retail stores may be the biggest beneficiaries. And that means that cities can thrive again because of their customer relationships on Main Street.

Square is a completely different solution with some profound effects on shopping, too. The company, named for its square-shaped device attached to the headphone jack on your iOS or Android devices. The Square swipes credit cards – Visa and Mastercard. Anyone can be a seller with a Square and a smartphone. Even a kid with the local lemonade stand can be their own store – taking credit instead of quarters. More than the other two, which are designed with POS sales in mind, Square opens the world of mobile commerce to farmers markets, food carts and more. A new version of Square called Card Case for iOS and Android sheaths your device and transforms it into a contactless payment service.

Shopping is about to get very interesting, just be careful where you tap and swipe.

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