Mobile phone payments look cool in movies, but now we're starting to see the possibilities of using your phone to pay for coffee, clothes and even concert tickets in real life.
It's early days, but global financial institutions such as MasterCard and Visa, as well as technology giants Google and Microsoft, are working towards making it safer and easier to pay for everyday items with your mobile phone.
On your smartphone, an eWallet is an app that you can use to make payments, claim offers and store loyalty card details. You save your bank and credit card details in the app, then use your phone to pay for items that are linked to the app.
Use is limited right now, but expanding, especially thanks to near field communication (NFC) technology – wireless technology that allows you to send your payment details from your phone to the store through a contactless terminal, similar to the way some credit cards can be used to tap and pay.Google, Apple and Microsoft have all developed eWallet systems, each one with different benefits and limitations:
- Windows Phone 8 Wallet will store credit and debit card details for making purchases, as well as coupons, deals and loyalty card details, and supports NFC for contactless payments in shops, as well as in-phone money transfers using registered banking systems. There are no Australian retailers using it yet though.
- Apple Passbook stores details about shop loyalty cards, coupons and airline boarding passes, and it can be used to store cinema and concert tickets. It can't be used for tap-and-go payments because the iPhone doesn't have the wireless NFC technology available at the moment.
- Google Wallet can store credit and debit card details, coupons and offers as well as loyalty card details for shopping and claiming offers. The Google Wallet app can be used with Android smartphones with NFC to pay for things with credit or debit cards that have been stored in the Google Wallet. Online payments are possible on websites with a 'Buy with Google' option, to pay with accounts held in your Google Wallet.
Some eWallet payment systems can also be used to shop online. PayPal is an example of an online eWallet system, and there are rival apps from the big credit card companies. These can be used to pay for things on a website using banking details stored online.
- MasterCard MasterPass stores credit and debit card details for a number of financial institutions for shopping online and using mobile devices.
- PayPal has iOS, Android and Windows Phone apps that can be used for making payments, sending money to friends and checking account balances.
- V.me by Visa stores your Visa and other credit card details so you can pay with an email address and password online through a computer, tablet or smartphone.
Wave goodbye to cash and cards
Paying for your groceries by simply waving your phone near a terminal requires NFC, which connects devices wirelessly to your phone when they're nearby. Payment terminals and checkouts will usually show the universal contactless payment symbol if they can process payments with NFC via a phone or tablet.
Unlike Bluetooth and Wi-Fi, which rely on radio transmission, NFC uses electromagnetic radio fields and passive tags that emit information. Active devices, such as NFC-enabled smartphones, can read information from tags and send information to other active devices. A smartphone using NFC to send data to your bank account will encrypt that information and use a secure channel to ensure your payments are made safely.
Commonwealth Bank lets customers with an Everyday account pay at any MasterCard PayPass terminal using the CommBank app on their smartphone. iPhones and Android phones that don't have an in-built NFC chip need to use the bank's PayTag attached to the phone, which gives it NFC wireless capability.
Mobile payment systems are incredibly convenient, but unfortunately they come with some security risks. As the contactless system involves financial details being stored online and transmitted wirelessly, there's a risk of accounts being hacked, and financial information being stolen or funds lost.
If any of your banking and credit card details are stored by Google or another group, you have to trust that they're secure. If the details are stored in a mobile phone app then – just like with your physical wallet – you need to be very careful about keeping track of your phone, and make sure you contact all providers if it's ever stolen.
There are also privacy considerations, as people store personal information along with banking details within their smartphone apps, and those apps will contain a record of all purchases and other transactions made with the account. The data will need to be well managed to maintain people's privacy.
On our shores
Many of the digital payment systems being developed have limited availability in Australia right now. If Aussie consumers take to mobile payments as predicted though, your choice of payment system is likely to come down to what's available on your phone's operating system and what system your bank or financial institution offers.