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[/ezcol_1third] [ezcol_2third_end]By Laura Haight, president, Portfoliosc.com[/ezcol_2third_end]
Conclusion of a two-part series on the future of mobile payments
It seems like a crowded field of mobile pay players emerged overnight. But Google Wallet has been operational for several years, while Current C and Softcard have been in development.
With mobile payments you use your existing card accounts, but connect them to your device. Because you are never handing over your physical card and the merchant (the weak link in the security chain) is never actually getting your account info, the legions of debit card users who have been hammered by hackers in recent years can feel much safer using their accounts.
Terry Garner, senior vice president for deposit operations for Southern First Bank, has been comparing these services from a financial institution perspective. That means protecting both the customer account and the bank’s interests. There are a lot of analysts doing the same thing through different lenses: security, convenience, the cool-tech factor.
But in the mobile pay arena, only one thing really matters: security. And that’s where Apple Pay gets an edge.
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Apple Pay doesn’t store your credit card anywhere. In fact, it only has your credit card data once – when it passes it along to your card issuer for verification. Once approved (in milliseconds), the issuer sends a device account number (DAN) back to Apple. This is stored in a dedicated chip in your iPhone. When you make a purchase, that DAN along with a one-time use token is used for authentication. Neither Apple or the merchant ever have your credit card number or PIN. To activate your payment, you use your fingerprint via Touch ID. There’s no app to find and open, no choices to make. The payment function is built into the NFC chip. You tap your phone to the payment terminal, authorize with your fingerprint and you’re done. Of course, you’ll need the Apple Watch or iPhone 6.
Google Wallet uses a token rather than maintaining the credit card information on your phone, but it does store your financial information in the cloud (yes, they say “securely stored”). It also tracks your purchasing habits, theoretically to improve your shopping “experience” by delivering up personalized offers (ads). The wallet is more versatile and will work with both bar-code scanning technology, which is used by Current C, and Near Field Communications (NFC). And they offer fraud monitoring and protection.
Current C – a consortium of major retailers led by Wal-Mart – was the solution to reducing the 2.5 percent fees charged by various credit card companies that eat into the often tight profit margins. Current C is not designed for flexibility or ease of use for the consumer, but rather to save money for the retailer. Currently in an extended pilot, the system uses a proprietary app that will scan a QR code. That initiates the sending of a token to your financial institution which then authorizes an ACH (automated clearinghouse) transaction from your checking account. Current C can also work with gift cards.
Current C was dealt a big PR blow recently when it was announced that its database had already been hacked. Email addresses, not card numbers, were reported to have been exposed. But the incident itself doesn’t instill tremendous confidence.
The other two mobile payment players at the moment are PayPal and your friendly mobile carriers (Verizon, T-Mobile and AT&T) who are bringing you Softcard.
PayPal has an app for Android and iOS that adds the security of an eight-digit PIN to secure your transaction. It also only works with retailers who are signed on in-network, and there aren’t a lot of those. The app will tell you which retailers near you are in-network.
Finally, the Softcard. Yes, there’s an app for that, too, and it uses the NFC functionality. But you’re not going to see it on iPhones for at least a year. Apple confirmed last week that there was a one-year lockdown on any other NFC applications, so you won’t see the Softcard in the App Store for a while. But it is working on Android phones. Want to test it out? Head over to McDonalds where you can pay for your Big Mac with a tap at the counter or the drive-thru. Unlike many other retailers, Micky D’s is all-inclusive – accepting Google Wallet, Softcard and Apple Pay.
All these systems have one similarity: They keep your credit or debit card out of the hands of the merchant. For that reason, if for no other, Garner says, the “debit card is not dead.” Combined with new EMV cards, new merchant terminals and the security built into mobile payments, you may be safer than you’ve ever been.
But that doesn’t mean you can let your guard down or stop monitoring your accounts. Somewhere in Eastern Europe, the cybercriminal who sold your Social Security number on the black market is working out how to crack this new tech.
