The Promise of Mobile Phone Payments

November 22nd, 2007 - 11:18 pm ICT by admin  

Instead of reaching for your wallet in the next few years, you’ll be able to pull out your cellphone and wave it over a scanner to make a payment.

Convenient? You bet. Secure? Companies working on this new system say it is rock solid. Encrypted payment information travels through the air from the phone to the scanner. The system is based on “contactless” technology already in some smart cards — credit cards and key fobs embedded with chips so they can be used instead of swiping a magnetic credit card. Chips are finding their way into driver’s licenses, passports and other forms of identification, and contactless cards are used in many transit systems.

“It’s relatively easy to make cellphones very secure devices,” said Allen Weinberg, managing partner at Glenbrook Partners, a Menlo Park, Calif., financial services and electronic payments consulting firm. He said the encryption is “as good as or better than what you do with an ATM or at-home banking. No one is going to pick up your phone and start moving money around the world. It’s just not going to happen.”

MasterCard introduced contactless cards in 2002 under its PayPass program, which allows for transactions of $25 or less without a signature, said Simon Pugh, head of MasterCard’s mobile group. With more than 19 million PayPass cards in use, MasterCard has simply taken the PayPass card proposition, in Pugh’s words, and moved it to the phone.

PayPass is now available in cellphones in South Korea, Taiwan and Japan, as well as in trials in the USA in Dallas, New York, Chicago, Wilmington, Del., and other cities. “We built security and encryption into the protocol,” Pugh said. A cellphone transaction is “equally secure,” he said.

The convenience of whipping out your phone as a payment mechanism is driving the transition. You wouldn’t need…

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