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Goodbye, billfold. Hello, smartphone

Taka Torimoto of Atlanta uses his phone to make purchases at fast food restaurants and other places that accept alternate methods of payments from cash and credit cards. (Ryon Horne/Atlanta Journal-Constitution/MCT)

Taka Torimoto of Atlanta uses his phone to make purchases at fast food restaurants and other places that accept alternate methods of payments from cash and credit cards. (Ryon Horne/Atlanta Journal-Constitution/MCT)

Here’s the thing about Taka Torimoto: He’s more likely to remember his smart phone than his billfold. And that spells opportunity for a whole raft of new players in the lucrative payments industry.

A 41-year-old technical consultant with an engineering degree from Georgia Institute of Technology, Torimoto has paid for fast food with the tap of his phone and sent money just as you would attachments in emails. His father digitally sends the grandkids cash for Christmas. No more checks.

Torimoto’s voice rises with excitement as he talks about the new possibilities. “Payments is one area that is going in so many different directions.”

For the first time since the advent of credit cards, there are new ways to pay that don’t involve cash, check or plastic. Most are built on top of the existing payments system, but – courtesy of that hand-held computer in our pockets and purses – offer new vistas for both consumers and tech entrepreneurs.

“It’s clear that the mobile phone is the device that people are going to be using in the future to pay,” said David Evans, chairman of the Global Economics Group. “It’s not going to be a plastic card.”

By 2017, Forrester Research estimates, Americans will spend roughly $90 billion using a smart phone or other handheld device, a more than seven-fold increase from the amount spent in 2012. The firm’s figures include mobile remote commerce; mobile peer to peer payments and remittances; and mobile proximity payments.

Even if its estimate is too optimistic – as projections in this arena have tended to be – the pace at which startups are emerging is already head-spinning: Stripe, PayNearMe and WePay, among more than a thousand others, fueled by billions of dollars in venture capital.

For consumers, mobile payments mean greater convenience and better security. For merchants and banks, they present new opportunities to track you and target sales pitches and rewards to you. And they give tech entrepreneurs a low-cost entry point into the multibillion dollar payments pipeline.

So why aren’t we already living in a post-plastic world?

In part, because everyone involved in the chain – merchants, card issuers, traditional processors, tech innovators and consumers – is looking to maximize how much money they keep at the end of the day. Sometimes, the interests of two or more players align, but often they don’t.

Sorting it out – via market forces and regulation – is likely to make for a period that’s exciting, bewildering, messy and frustrating. And right now, we’re at an inflection point, where what emerged as a handful of novelties is becoming a new way of doing business.

That’s evident in the changes the incumbents are making. Banks, payment networks such as Visa, MasterCard, Discover and Amex, and the tech companies that serve them, such as FIS and Fiserv, are scrambling to keep up.

“In 2014, you’ll see larger payments entities scramble to accelerate the pace of their innovation to catch up to these smaller and more nimble competitors,” PayPal President David Marcus predicted in a blog post.

“Meanwhile, smaller players will scramble to achieve the scale and experience needed to compete in a global business,” he wrote. “As a result, billions of dollars will be at play in the payment industry, and 2014 will be a year of game-changing disruption.”

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