Is Your Next Credit Card Your Cell Phone?

(Note: Another article showing a reference point for my opinion.)

VIDEO: The latest way to pay at the stores relies on smart phone app technology.
Jan. 26, 2011

Get ready to retire that worn leather wallet. If some of the country’s biggest tech companies have their way, all the plastic cards crammed into your billfold will soon find their way into your phone.

Apple is planning to introduce a service that would let consumers use their iPhones and iPads to purchase products, essentially turning a user’s cell phone into a credit or debit card, according to a Bloomberg report.

Citing Richard Doherty of consulting firm Envisioneering Group, the report said Apple plans to embed NFC (near field communication) chips into its next generation iPhones and iPads that can beam and receive information within a distance of up to 4 inches.

Instead of swiping plastic to pay at the register, a user could just take out a cell phone and wave it near an NFC-enabled reader. The purchase amount would be deducted instantaneously.

When reached by, Apple spokeswoman Natalie Harrison said the company does not comment on rumor and speculation. But the report has industry watchers buzzing about the potentially game-changing technology that could eventually transform cell phones into so-called digital wallets.

Although Apple hasn’t yet publicly declared its support for NFC technology, other major stakeholders, such as Google, Samsung, Nokia, Research in Motion (RIM) and cell phone carriers AT&T, Verizon and T-Mobile, have already started lining up behind it.

Google’s latest Nexus S smarphone from Nexus is NFC-enabled, and Nokia and BlackBerry’s RIM have said that they intend to offer more NFC phones in the near future.

Gwenn Bezard, co-founder and research director at technology research firm Aite Group, said that regardless of whether the Apple NFC plans are true, the technology is poised to take the mobile industry by storm.

“It’s not a matter of if Apple is going to come up with something, it’s a matter of when,” he said. “Whether it’s going to be this year or next or the year after, I think there’s a very high chance that Apple and other companies will push NFC payments.

The pay-by-phone market is expected to make up $22 billion in transactions by 2015, according to Aite Group. That’s “still a drop in the ocean” compared to the total amount consumers spend in the U.S., Bezard said, but considering that the pay-by-phone market is about nil right now, Aite’s research still shows that the market is accelerating.

How Secure Are NFC-Enabled Cell Phones?

Bezard said big companies are getting behind the new technology because it significantly boosts the level of interactivity between consumers and merchants by integrating payment, marketing and promotion at the point of purchase.

At a CVS checkout counter, for example, a user wouldn’t need to pull out a credit card, loyalty card and coupon to score a deal on toothpaste. She or he could just use a cell phone payment system that rolls all those streams of information into one.

For consumers, pay-by-phone services mean more convenience and a potentially easier way to manage and save money. For corporations, it increases the potential for targeted mobile advertising and data collection.

Just this month, Starbucks introduced a nationwide mobile payment system that lets users pay for coffee with an application loaded on their smartphones.

More complex versions of the service are still in the early stages, but Bezard said mainstream adoption NFC-supported payment services could be upon us in 10 years.

“Hopefully, everyone gets a better deal out of it,” said Bezard. “Money is already digital in many respects, but it would be great, all the way to the finish line, to have the payment disappear into the device.”

NFC-Enabled Phones Pose New Class of Threats, Security Expert Says

Experts warn that before consumers and corporations jump on board the new technology, security concerns need to be addressed. With credit card account information tied so closely to users’ mobile phone, identity theft could become a rising concern.

“It’s probably a new enough technology that concerns over the security are healthy,” said Jonathan Giffin, a Georgia Tech College of Computing professor who specializes in system and software security. “Until this technology is analyzed in a public way by experts in security and wireless protocols, I think we don’t know how secure this is yet.”

Similar to RFID (radio frequency identification) technology, NFC technology is a kind of radio communication that works only a very short range. But Giffin said security experts have shown that RFID cards are vulnerable to attacks.

“People have demonstrated that you can walk behind someone and scan their RFID card without their knowledge,” he said.

And NFC-enabled cell phones potentially pose an even greater security threat than RFID cards: Not only would these phones store a user’s financial credentials, they would be connected to the Internet, he said.

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Mobile Commerce Firm: Digital Wallet Is Coming

Attackers could try to access that valuable data across the Web or through nearby NFC readers.

“There’s a whole different class of threats that designers need to be concerned about,” he said.

Still, Francesca Nisco, a spokeswoman for Isis, a mobile payment network backed by AT&T, Verizon and T-Mobile, said that, in trials, consumers say that they’re ready to embrace a digital wallet despite security concerns.

“Many people have had trials for a long time, but I think there’s a recent surge of action in the marketplace because there’s been an increased understanding of how much consumers are excited about this technology,” she said.

The carrier-backed network was officially launched in November and in the next 12 to 18 months will roll out its mobile commerce service nationwide, Nisco said.

Forget carrying credit cards, cash, debit cards, loyalty cards, gas cards, coupons, transit passes and all the other cumbersome contents of your wallet. The new service puts it all in your cell phone.

Nisco said the company is still working out the details of its payment process, but said a hardware-based, passcode-protected and encrypted system will safeguard consumers’ information.

If a user loses an Isis-connected cell phone, he or she can erase all the financial data stored on it with a single phone and then restore the information instantly with another call, if the phone is found..

The initial Isis roll-out will focus on mobile commerce, Nisco said, but mobile phones that store insurance cards, driver’s licenses and other kinds of wallet-worthy information are expected to follow close behind.

“We believe that the mobile wallet is certainly coming,” said Nisco. “It will certainly be some time before it is mainstream, but we certainly believe that there will come a day when everything you carry in your wallet will be on your mobile device.”

Thank you. Be blessed!

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