Are we giving up on mobile payments already?
- 23 November, 2013 12:04
Aren't credit cards supposed to be obsolete by now?
A credit card is basically a slab of plastic with a strip of VHS tape glued to the back. That magnetic tape holds a few numbers and letters which identify the bank, the account, the user and other minor data. Plus, everything an unauthorized user needs to buy things with your credit card is easily readable on the front and back of the card.
Credit cards are incredibly low- and dumb-tech, easily "hacked" and easily copied, lost or stolen. When the card is compromised, the user has to call, wait on hold, then after a painful conversation of verification with a call center worker, has to wait days or weeks for a replacement card to arrive.
Each account has its own card. So if you have 10 accounts, you have 10 cards, forcing you to carry around a George wallet.
Meanwhile, the smartphones everyone carries around are more powerful than the fastest supercomputers of the 1990s.
So why aren't we using smartphones to convey those numbers and letters stored on the magnetic tape of our credit cards?
The reason for us all to miss this enormously beneficial opportunity is as dumb as the credit card and as old as the industrial revolution: The industry won't agree on standards.
As a result, the previously slow momentum toward mobile payments and digital wallets is becoming slower still, and in its place, companies are creating better credit cards.
Why credit cards? Because everyone agrees on the interface: the stores, the banks, the users -- everybody.
The trouble with mobile payments
A huge number of companies are involved in turning smartphones into credit card killers: Dwolla, LevelUp, PayPal, Google, Square, Apple, Facebook, Lemon, Isis, Venmo, Bump Labs, Groupon, Zipmark and others.
Mobile carriers and credit card companies are involved, too. In fact, many of these players are carving out standards and alliances that prevent any mobile payments system from being usable by all consumers at all stores.
QR codes are slowly being replaced by NFC (near field communications) as a way for phones to communicate with point-of-sale systems. Yet today, only a tiny fraction of mobile payments are conducted via NFC. Apple has rejected the technology completely, claiming security concerns.
So if you embrace a mobile payments solution and try to pay with things with your phone, most stores won't accept it.
For consumers, the whole mobile payments scene is a confusing mess. So they're sticking with credit cards.
And that's why credit cards and credit-card like devices are experiencing a renaissance.
San Francisco-based startup Coin is creating a new crowd-funded product and service called Coin. In a nutshell, Coin is a simulated credit card. It's a storage device like a credit card is, except it can hold the data for several credit and debit cards.
Like a regular credit card, the Coin card will have your signature and name on it. And it can be swiped and used like a conventional credit card. But that's where the similarity ends.
You use a mobile app to load credit card information from your other cards, or use an included device for swiping your cards to duplicate their data into the Coin card.
It can be preordered for $50, but it will eventually cost $100 per card when it ships next summer, according to the company.
Coin has security features. For example, if you lose it, the card can lock itself. (It needs to be physically near your smartphone or it won't work, if the user chooses that option.) Coin uses 256- and 128-bit encryption on the card itself, plus the iOS or Android mobile app. It will also have a fixed life of two years, after which a new Coin card will have to be purchased.
Security experts say the Coin card could be a security nightmare, but Coin says they're working through the security risks and hope to solve them by the time the product ships.
There are other challenges. For example, some credit cards or retail stores may choose to not support Coin cards.
Online companies offer physical plastic cards
One of the most surprising new developments in this space is Google's release this week of the Google Wallet Card -- a physical debit card.
It's surprising because Google exists to get people off physical media and into virtual digital everything. They've also been a leading force in mobile payments with both Android and Google Wallet.
The Google Wallet Card works just like Google Wallet, but it's compatible with every retail store that accepts debit cards. You simply link credit card and bank accounts to your Google Wallet account, then transfer money. If the store you're buying from doesn't accept NFC tap-and-go payments, just whip out the card. It can be used wherever Mastercard is accepted, and also as an ATM card for getting cash.
Other online-native companies have done something similar. PayPal, for example, has a physical card.
Another startup called Simple offers a debit card, but it's tied to a range of convenience services and options inside a mobile app. For example, you can deposit a check into your account by taking a picture of it. The app facilitates money management and budgeting, too.
While the financial, wireless and handset industries are having trouble pushing mobile payments on consumers, people are voluntarily crowd-funding and waiting for solutions that involve a credit card-like card.
These new credit card- and debit card-like solutions are really delivering most of the functionality promised for mobile payment solutions but usable in something like a credit card.
Unlike the mobile payment scene, which is complex, confusing and rife with frustrating incompatibilities, the new generation of credit card and debit card solutions are easy to use, almost universally compatible with retail and banking transaction equipment and, best of all, provide a range of benefits for managing and controlling money without surprising fees.
These cards aren't the mobile payments nirvana we were promised. But are they a step in the right direction?
Yeah, I'll buy that.
Mike Elgan writes about technology and tech culture. Contact and learn more about Mike at http://Google.me/+MikeElgan. You can also see more articles by Mike Elgan on Computerworld.com.
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