Technology: Need another reason to pay by phone?

SAN FRANCISCO – The tech industry has been saying for years that smartphones will make traditional wallets obsolete. But most people still use cash or plastic when they shop.

That could change later this year, when three leading tech companies are promising to give shoppers more reasons to use “digital wallets.”

Apple said it’s adding store-issued credit cards and store rewards programs to Apple Pay, the mobile payments service it launched last fall. Google is readying a similar service for millions more smartphones to run on its Android software. And Samsung promises that a service for its newest Galaxy smartphones will be accepted in more stores than Apple Pay or Google’s Android Pay.

“Our ultimate goal is to replace the wallet,” Apple Vice President Jennifer Bailey told software developers recently.

The new options come as numbers show mobile payments are still in their infancy: About 16 million U.S. shoppers used smartphones to pay for $3.5 billion in store purchases last year, according to the eMarketer research firm. While that’s a tiny slice of the $4.3 trillion spent in stores overall last year, eMarketer expects mobile payments will grow to $27.5 billion in 2016.

The progress follows years in which the industry has struggled to get digital wallets off the ground as major players failed to agree on technical standards, security measures and financial terms.

Still, Apple opened the door for widespread adoption of digital wallets last year when it launched Apple Pay with endorsements from major banks and retail chains.

With Apple Pay, which only works on the latest models of iPhones and the Apple Watch, users link a credit card or bank account to their iPhone. Once that’s done, a user only has to hold the phone next to a device at a store counter. The phone and the store device communicate wirelessly, prompting the user to authorize payment by pressing the phone’s fingerprint sensor instead of swiping a plastic card. Apple Pay uses encrypted codes to protect shoppers’ financial information.

One early fan is Allison Lucas, a 35-year-old tech worker who tapped her Apple Watch to pay for items at a Walgreens in San Francisco last week.

“You don’t realize how much freedom it gives you until you try it,” said Lucas, who used her watch to pay for lunch on another day when she accidentally left her wallet at home.

But not everyone is convinced they need Apple Pay.

“I might come around and try it at some point, but I haven’t really seen a reason,” said Amalia Bornstein, a 29-year-old data analyst.

Apple says it’s offering more reasons this fall with its next software update, which will let shoppers charge store credit accounts and redeem loyalty points from major chains. Forrester Research analyst Sucharita Mulpuru said frequent shoppers see loyalty rewards as an important benefit, and they want an easy way to use them.

Google, which struggled to win support for its Google Wallet service, says major banks and retail chains have signed on to its new Android Pay. The service will work similarly to Apple Pay when released later this year.

Google says it will incorporate store rewards but won’t work with store credit cards to start.

Samsung, meanwhile, says it’s addressing another hurdle with a service called Samsung Pay, due for release this fall. Unlike rival services Apple Pay and Android Pay, Samsung says its technology will work with traditional store credit-card readers.

Apple Pay and Android Pay only work in stores with equipment capable of receiving data from smartphones via “near-field communication.” But new models of Samsung’s Galaxy smartphones will transmit two kinds of signals — one for NFC readers and one that works with older equipment that merchants use to read the magnetic stripe on credit cards.

Many smaller stores don’t have NFC readers. But Visa and MasterCard are pushing retailers to meet an October deadline for installing new terminals that read cards with embedded microchips, which are more secure than magnetic stripes. While the technologies are separate, many chip-card readers will accept NFC signals, too.

WAYS TO PAY WITH YOUR PHONE

Apple Pay

• How it works: Apple Pay lets you pay by placing an iPhone 6 or 6 Plus, or Apple Watch, next to a store device equipped for near-field communication signals. You authorize the transaction with your fingerprint.

•Where it works: Apple says it will be accepted at 1 million locations by next month. Most are chains, although some independent stores have NFC readers as well.

Android Pay

•How it works: Android Pay will work much like Apple Pay. Android Pay will be available for any smartphone with an NFC chip and Android software known as KitKat, Lollipop or the upcoming M. For older phones without fingerprint readers, it will require a PIN to authorize transactions.

•Where it works: Google says the new Android Pay will be accepted at 700,000 retail locations to start, including many of the same chains that accept Apple Pay, and even some vending machines with NFC readers.

Samsung Pay

•How it works: Samsung plans its own payment service for new Galaxy S6 smartphones later this year. Like Apple Pay and Android Pay, the Samsung service will use the phone’s fingerprint reader for security.

•Where it works: Samsung Pay promises to work at millions of stores, regardless of whether they have an NFC terminal. New Samsung phones will have an NFC chip and a separate technology that communicates with older store devices that read the magnetic stripe on a standard credit or debit card.

PayPal

•How it works: PayPal’s smartphone app shows a list of participating stores near you. Once there, you swipe your screen to “check in” after making a purchase or ordering food. In some cases, the app sends a wireless notification to the store, where a clerk completes the transaction and charges your PayPal account.

•Where it works: PayPal is accepted by a number of online sites and independent retail stores but only a few major chains, such as Home Depot, Foot Locker, Autozone and Toys R Us.