The Future of Contactless Payment Systems

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Last year’s major reveals from innovative companies (like Apple and Google) introduced several products to the technological realm. Apple alone revealed four different products last year: two versions of the iPhone 6, Apple Pay and the Apple Watch. Apple Pay allows consumers to pay for purchases without having to swipe their credit cards, but simply wave their smartphones in front of the card readers for the payment to be processed.

Near field communications (NFC) isn’t a new concept; it just took some time for a large company to come along and really push it as a necessary technology. Systems such as Google Wallet and LoopPay are also trying to get in on NFC technology and are scrambling to keep up with the success of Apple Pay. With all the recent credit card fraud and security breaches, there’s no better time than the present to start accepting the new, innovative products that are not only convenient, but it’s still unsure whether this method is actually more secure.

Since Apple Watch is releasing in the next several months, we have to ask ourselves, what does the future of our mobile payment systems look like?

Wearable Technology = Wearable Payment Methods

The most recent innovation of mobile payment systems is to wearable technologies, which have now led to wearable devices that are capable of storing your payment methods and account information to make purchases by simply waving the device in front of the contactless payment reader. So far wearable technologies have been designed as a watch to be worn on your wrist.

NFC Technology. NFC technology works by allowing two devices to communicateapple watch when within range of one another in order to exchange data. The Apple Watch brings to your wrist everything that an iPhone brings to your hand with an entirely new way to experience apps. It comes fully equipped with Apple Pay and works the same way, too. The user simply needs to load the watch with their debit and credit cards, choose the one they want to use when making purchases, and wave the screen in front of the contactless payment system to complete the transaction. Apple Inc. is infamous for expanding the limits of technology, as well as encouraging personality and individuality to each of their devices. It will be available in three different styles, an array of assorted colors, and even an 18-karat gold watch case, finished off with a polished Sapphire crystal glass face.

Wi-Fi Technology. Also new to the wearable technology market is Token.token Developed by Artefact, an award winning technology product design and development company. The first in a series aimed to “reinvent” the present through innovation, knowledge, and technologies; Token is described as a “Wallet on your wrist”. It differs from the Apple Watch in that it doesn’t offer a multitude of apps and functions, it simply keeps all your payment options together on your wrist. The bracelet can connect to checking and savings accounts, credit and debit cards, digital currencies, and even a PayPal account. It is contingent on a merchant’s Wi-Fi and can receive product information and make transactions all with the touch of a finger.

On top of all that, the device is designed to make you a smarter consumer. The theory is that by having  access to your budget prior to making a purchase can minimalize impulse buys or items you cannot afford. The designer’s research on behavioral economics shows that consumers are more likely to make informed buying choices after being shown the negative outcomes of bad spending habits.

Host card emulation (HCE). The most popular modes of NFC technology is HCE,Wirecard which is also thought to be the most risky since it doesn’t rely on a secure element. One of the most recently wearable payment technologies to be announced is the Wirecard Smart Band. This device is a band that’s slightly smaller than most watches, and allows for quick contactless payments when the user holds the Smart Band near the payment terminal. The transaction will then display in real time on the screen of the device, and within the smartphone app that works with the band. The device can synch with other mobile services and double as an admission control wristband like those used for cruise ships, festivals, resorts, and theme parks. To make a purchase with the Smart Band, the user must first upload their payment preferences into the smartphone app. Then, when ready to make a purchase, the data is replaced by a token which is transferred to the bracelet. The information embedded within the token provides a secure transaction that hides all personal and payment information.

The long list of Android’s wearables has not yet caught up with watches or wristbands that allow for payment transactions, but it is clear that the capability is not far off. Paired with Google and equipped with most of the technology of a smartphone, the payment systems are still underway. However, the delay could be because Google is aiming to design a payment system that does not rely on NFC communication. Devices such as the Nymi wristband and Google Glass are said to also function with Bitcoin wallets.

It’s Fast and Convenient, but is it Secure?

The biggest concern with the wearable payment devices and the technology used is security. Because the technology is so new, there is much debate to whether or not these devices are fool-proof to hackers and cybercriminals. Chip enabled credit cards will finally be fully implemented across the nation by October 2015, which are said to provide an additional level of security that typical magnetic strip cards are not capable of.

Now, imagine your chip enabled card inputted into a wearable device which scrambles your personal information prior to making a contactless transaction, to then complete the purchase with a unique PIN number. Some wearable devices, won’t bother with a PIN number, and will instead authorize purchases from the user’s biometrics, such as fingerprints or heartbeats.

The added layers of security  should put consumers at ease; however, one report by Drop Labs revealed that it’s easy to commit credit card fraud with Apple Pay by using stolen identities. Additionally, a security researcher in Australia has discovered a way to clone contactless credit cards using an Android app.

With so many cybercriminals and hackers watching this technology closely to discover loop-holes quickly, I know I’ll wait for things to get fine-tuned before I jump on the new craze.

 

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