In my wallet, plastic is king. I use my credit card for almost every transaction, though in rare cases I still go for cash. Like many others in this country and around the developed world, I also carry my cell phone around with me everywhere I go. Cell phone technology is progressing quickly, and this year, more phones with payment capabilities will be in the hands of consumers.
New technology allows mobile phones to be used as payment devices. Some vendors, like Starbucks, offer mobile apps that store your credit card information. When you pay for a drink or some other product, you can bring up a bar code that represents your card information. The cashier can scan your phone to accept the payment. This technology is similar to using a credit card, but reduces the need to fumble through a wallet.It depends on the retailer offering an application for your phone, and it may not be compatible with other retailers.
The more exciting technology is near-field communication, an extension of the RFID technology that some credit cards already use. When you have a phone with near-field communication enabled, the device needs to be within four inches of the receiver to complete a contactless transaction. The working distance of eight inches helps to protect the wireless signal from being intercepted, but the risk still exists. With this technology, a nearby reader could activate your payment system without your knowledge.
Furthermore, a stolen cell phone containing any mobile payment technology can be tampered with. A thief could use your phone to pay for items, increasing your credit card bill, much like a thief who steals your wallet might do. Credit card companies won’t hold you liable for charges after a theft of your credit card information, but this isn’t a strong enough reason to use technology without safeguarding against theft.
The mobile carriers AT&T, Verizon Wireless, and T-Mobile have joined forces with Discover® to create a mobile payment gateway, Isis, to compete with Visa and Mastercard in this new space. Isis believes this will be a big year for mobile payments, but that depends on the public buying new phones that contain near-field communication technology. The iPhone 5 is said to contain this technology and is rumored to be released in June.
I’m not going to be one of the first to use this new technology. While it’s unlikely for my credit card information to be hijacked, phones are insecure devices. I don’t plan on using contactless technology for payments until I see that more can be done to protect the consumer. I’m usually interested in new technology and enjoy being on the leading edge, but I’d rather be cautious with any technology that makes it easy to spend money and is prone to digital theft or interference.
Do you use mobile payment technology now? Will you buy a phone with and use near-field communication for payments?
Photo: Yutaka Tsutano
Updated January 7, 2016 and originally published January 24, 2011. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.