Portable Payment Systems: What’s the delay?

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For a few years now we have heard about the wonderful high-tech innovations that will make payment transactions faster, easier, secure, more affordable, and completely portable. Using Wi-Fi, Near Field Communication (NFC) and smart phone technology have made it possible to complete purchase transactions without even using actual plastic. The question many of us are asking today is where are all these payment technologies? If they are really that great, why aren’t banks and retailers rolling them out and promoting them as the latest new thing?

3 Competing Pieces of One Puzzle

There are three key components that have to work together seamlessly, to make a mobile payment systems possible on a large scale. These major parts of the infrastructure are the mobile device or smart phone, the security chip or SIM card in the phone that safely stores your data, and the wireless carrier that you subscribe to in order to activate the device and make it work.

As consumers already know, phone manufacturers have a tendency to promote one particular platform or software instead of cooperating so we can have a universal platform. If you have to also make those functions work across every retailer or bank’s payment processing infrastructure that adds to the complexity. Agreeing on which kind of SIM card to use to store the data and encrypting it is easier said than done since different phone manufacturers favor different component makers. The companies that supply those chips or cards also want to be compensated for making a more secure product – so they are negotiating for more money.

Rumor has it that Google wants to use cloud-based encryption to get around all of those problems. Instead of encrypting your account information on the phone, this approach would send the data to the cloud and then encrypt it once it gets there. As the unencrypted data travels over the Internet to get to the cloud, however, it is highly vulnerable to hacking. Needless to say, there are still some kinks that need to be worked out for that solution to instill confidence in banks and consumers alike.

Encryption is the Key

All of this discussion points to one big central issue, namely the fact that security is paramount these days. Think back to the pre-digital days when there was no such thing as shopping on the internet or using cell phones. Credit cards were very static but at least they were very secure. Unless you lost the card or someone copied down the numbers, you were pretty much good to go. That’s ancient history, though, and these days security is the name of the game. Bad guys find it easier, faster, and millions of times more profitable to steal credit card data over the airwaves than to try to pick your pocket, and they are getting away with it.

On the day I wrote this, CNN reported that Community Health Systems, which operates 206 hospitals, had its computers compromised. Confidential data for more than four million patients was stolen. Two days earlier it was reported that Albertson’s and Shop 'N Save store chains were similarly hacked, but they weren’t sure if any data was taken. Prior to that it was the Michael’s Store chain, and before that there was the huge data hack at Target. These kinds of massive data breaches and vulnerabilities, such as the Heartbleed Bug, have become so frequent over the last year that they are almost the norm.

Figuring out the most effective way to encrypt data is the trick at hand. Since all of the different parties involved have not yet reached a consensus about how to ensure that kind of security and package it all together, the rollout is temporarily stalled.

Where Mobile Payment Technology Stands Now

The bottom line is that the technology exists. Putting it all together in a way that satisfies and financially rewards all parties involved, including  the financial industry, however, may take a lot longer.

Meanwhile consumers just have to wait and see. Sure, mobile payments will be convenient and allow us to leave the plastic at home instead of worrying about that old slogan, “don’t leave home without it!” No one wants to sacrifice the security of our confidential financial data, though, just to relieve us of the trouble of carrying a thin, lightweight piece of plastic.

While patiently waiting, we can at least look forward to a widely-accepted and implemented upgrade to safer PIN-and-chip enabled credit cards. Banks, merchants and consumers are all in agreement that the time has come for those to go main-stream.

Legislators and industry regulators concerned about financial fraud are also pressing for their deployment, which is another incentive for banks to finally get off the sofa and do something about it. Those changes will definitely cut down on credit card fraud and tie us over until more futuristic innovations, like mobile payment technologies, are safe and affordable enough to hit the street.

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