Mobile wallet adoption is on the rise according to new research, but the products are very young still. In fact, it has yet to be sorted out exactly how these products will help bring frictionless payments to market. There’s an almost even divide between mobile wallets that employ NFC — near field communication — and those that use GPS location-based systems for payment. One requires users to tap their phone to a point-of-sale terminal, the other does not. Whichever process reduces friction for consumers and delivers value to merchants will likely win the market penetration game in the long-run.

Isis, the mobile wallet app supported by a troika of mobile service providers (AT&T, T-Mobile and Verizon), and Google Wallet are both betting on NFC. So is Apple, which quietly filed patents for an NFC-enabled mobile wallet application in 2009.  These three products’ ability to dominate the market might determine the way things progress, but it doesn’t necessarily mean that NFC wallets are the most frictionless sort of payment. Watch this video on how Isis works below:

The question that NFC technology raises is this: with such incredibly futuristic technology at our disposal, why do we even need to be tapping things to other things? Do we need to be scanning products ourselves in the supermarket’s aisles? Still, NFC will be the most frictionless transition from the current state of affairs. It is, after all, nothing more than a digitzed version of closing out a cash or plastic transaction. It doesn’t require that we completely throw out the old model.

On the location-based side of the mobile wallet debate we have Square, LevelUp and PayPal, all three of which are betting that your phone’s GPS will be a better way of interacting with POS terminals. With something like Square, you keep tabs with your favorite businesses, and open them upon entering. The POS terminal — an iPad in this case — will be alerted that you’re present, or at least nearby. Once it’s time to pay, users can simply hit a few buttons and close out their tab. They don’t even have to deal with a cashier if they don’t want to.

With PayPal’s Here product, the transaction is a little different in that it actually takes place at the cash register — or, rather, a PayPal Here terminal.

Watch Square’s video for a sense of how these payments work:

Both enable merchant-based rewards programs, and both make payments almost friction-free. NFC requires no fine motor-skill function on its users’ part, while location-based payments do. On the other hand, NFC technology requires that you actually interact with a human being, while location-based payments obviate the need for this interaction.

It’s not unthinkable that POS terminals in the future could be both NFC and locations-based payment compliant. Meaning this might not even be an issue. The privacy issues that location-based payments raise are worth a mention, here, too. Do you want the barista to know when you walk down the street? What if she is your ex-girlfriend? What if you’re in a terrible mood, wearing sunglasses and a hat and don’t wish to be recognized by anyone, not even your best friend? Plenty of people would be willing to trade a more complex transaction for a modicum of privacy.

That said, which would you prefer? NFC or location-based payments? Maybe neither? Vote below:

Willy Staley

Willy Staley is a staff writer and columnist for His columns focus on banking, monetary policy and culture.