On Thursday, Google, Citi, MasterCard, Sprint and First Data announced Google Wallet. It's a new mobile app that's intended to essentially replace your wallet. According to the Official Google Blog:
Because Google Wallet is a mobile app, it will do more than a regular wallet ever could. You'll be able to store your credit cards, offers, loyalty cards and gift cards, but without the bulk. When you tap to pay, your phone will also automatically redeem offers and earn loyalty points for you. Someday, even things like boarding passes, tickets, ID and keys could be stored in Google Wallet.
But don't throw away your leather wallet just yet. According to the press release:
Google Wallet is currently in a field test and will be available to consumers this summer. At the event, Google, Citi, MasterCard, First Data and Sprint introduced Google Wallet and invited additional issuing banks, payment networks, mobile carriers, handset manufacturers, point of sale systems companies and merchants to join the initiative.
Until many more companies get on the bandwagon, it's going to be limited. This SmartMoney article describes what will be necessary for early adopters to use Google Wallet:
In order to take advantage of Google's new technology, customers must: own an Android phone equipped with an NFC chip, currently limited to Google's own Nexus S, widely considered one of the least-popular smartphones on the market; have a Citibank MasterCard-branded debit or credit card or be willing to use a Google-branded prepaid card; and shop at a retailer that has the technology to accept MasterCard's contactless payments, which so far, only about 300,000 do.
Another thing that may slow this technology are legal disputes. Soon after the announcement of Google Wallet, PayPal filed a lawsuit against Google claiming that Google "stole its ideas for a new service that is trying to turn smartphones into digital wallets."
It may take a while, but in 10 years I wouldn't be surprised if 50% of payments will be done using smartphones. If they can ensure the smartphones and applications are secure and don't break or crash, it could simplify things. However, if I have to worry about running anti-virus software on my smartphone like I do now with my PC, the simplicity starts going down hill.