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Mobile Payments Could Be the End of Credit Cards

This article was written by in Consumer, Credit. 17 comments.


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

Published or updated 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.

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About the author

Luke Landes, also known as Flexo, is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about him and follow Luke Landes on Twitter. View all articles by .

{ 17 comments… read them below or add one }

avatar krantcents

No, I do not plan on using it. It seems there are more risks than benefits! Unless there is a pin which would reduce the speed of the transaction, I would be concerned with security.

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avatar DonnaFreedman ♦2,496 (Dollar)

I don’t have a smart phone. I have a dumb phone. At some point I will probably upgrade (and will likely wonder what took me so long) but I’m wary of using a mobile phone as a credit card. Could there be some kind of password protection for each account? If someone were standing nearby silently recording your keystrokes that wouldn’t help, but if you lost your phone or if it were stolen you would have time to shut down the credit card accounts before they were hacked into.
Just askin’.

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avatar Luke Landes ♦127,386 (Platinum)

Some payment apps require a PIN or password — but both can be hacked if a phone is stolen. Some don’t, and rely on the phone’s own password — if one is set. Linking your payment app to a credit card is good because you do have the time to cancel your cards and report the theft… if you link the payment app to your bank account, you could find yourself with overdrafts or other fees that, while the bank will likely forgive, could present a long and difficult process to fix.

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avatar Jeff @ Sustainable Life Blog

I’d have to say that like you flexo, I’m excited for this, but definately wont be one of the first adopters. I’ve got something similar on my phone now for discount cards, and currently it works about half time time (I’ve got 3 cards in there because the other ones either wont scan or I need the physical card at the gas pump because not all have the barcode scanners). I will still put all of my stuff on a credit card (for the miles!) but would rather deal with that getting lost than having someone remotely hijack my card information. Although from the way you make it sound in the article, they’d only be able to use the card at starbucks (or whatever retailer whose info they hijacked)?

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avatar Yana ♦218 (Cent)

No, I agree with you and would not do this. It is a risk I have no reason to take.

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avatar Bobka ♦13 (Newbie)

I don’t believe I’d use it either. In addition to the risk, there doesn’t seem to be much to be gained here. Card swipe technology is plenty fast already. Is this just a new technology for technology’s sake?

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avatar damich

I too am excited about this technology but also wary and will wait and see before diving in. As to what is to be gained? No need to carry a driver’s license, debit card, credit card(s), library card, etc., just a phone/device with all of this information.

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avatar skylog ♦368 (Nickel)

pretty much going to echo what most everyone has said, i am very excited about this and feel it will happen “sooner or later,” but i am going to have to see the technology evolve more before i would use this technology.

i am a little upset that the united states is so far behind in this technology, as well as other technolgies, but i know eventually these types of things will happen on a broad scale here. then again, the united states can not even move from a paper dollar bill to a dollar coin…perhaps the wait will be longer than i think/hope.

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avatar 20andengaged ♦367 (Nickel)

I haven’t used the technology before but I think it will become increasingly popular. Easier to carry your information around.

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avatar eric ♦1,549 (Half-Dollar)

I’m definitely iffy about security but when I went to Asia, I saw ppl paying with their phones. I admit it was pretty cool looking.

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avatar Joe

While I can see this as an additional payment method, I don’t see the plastic card going away. Not everyone has a smart phone for starters. Plus, what happens when your battery dies? What happens if you break your phone? Are you expected not to shop while your phone is being repaired or your battery is charging? There are lots of things that can go wrong if this is your only method of payment. Additional method perhaps, but I suspect everyone will still have a card, even if its locked up at home., as a backup method.

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avatar rewards ♦31 (Newbie)

I’m not even a fan of Mobil’s SpeedPass, MasterCard’s PayPass, that CitiBank keychain fob thing, etc.

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avatar paul

Just another step closer to becoming completely cashless, the Gov wants to know out every move, big brother wants to know what your likes and dislikes are! People will accept this new device just as they did when credit and debit cards came on the scene, before you know it people will be accepting a mark either in their right hand or foreheads as the bible speaks of no man can buy or sell without this mark. Jesus is coming soon people get ready!

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avatar faithfueledbennetts ♦264 (Nickel)

Wow, I have never heard of this before. This is a really interesting concept! If I had a phone with this capability I would absolutely try it. It is so exciting to think about what our technological world will think of next. Sounds like we will just need to keep a closer eye on our phones rather than our wallets.

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avatar TakeitEZ ♦549 (Dime)

I don’t plan to adopt it right away but would likely experiment it once it was more popular and secure.

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avatar wylerassociate ♦906 (Dime)

call me old fashioned but I won’t be doing this. I’ll pay bills online and save the worries about information being compromised.

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avatar Charla

These phones have been being used all over Africa, even in the bush, for some time already. The US is just a bit slow.

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