Alcatel-Lucent has demonstrated Google's Nexus S being used to accept a Near Field Communications (NFC) payment, showing that NFC can do more than replace a customer's wallet.
Mobile phones are going to replace physical wallets, but for taking payments, merchants still use expensive readers bought (or hired) from the banks. Alcatel-Lucent reckons that becomes unnecessary as its software will use a standard Android handset to enable Near Field Communications transactions.
This opens the way for everyone from supermarkets to market stall-holders to accept electronic payments, though an account with some sort of collection agency will still be necessary. There are also significant security considerations, which aren't addressed by the company's demonstration.
The system uses Alcatel-Lucent's mobile wallet service, which can be bought by anyone wanting to run an electronic-payment system (think mobile network operators, loyalty schemes, gift voucher processors as well as traditional banks). Traditional terminals are highly secure proprietary systems, and often cost more than one imagines they should, replacing them with standard hardware is attractive, though convincing the world that an Android handset can be made secure will be tough.
Existing mobile payment systems, such as the bar codes being deployed by Masabi on the UK train networks, can't be read by another handset as phone cameras aren't good enough to read a code displayed on-screen ... at least not yet.
NFC could score here, if the security issues can be adequately addressed, and soon our phones will be able to take money off of someone else as well as helping us spend our own. ®