Using the mobile phone as a credit card

Inside Contactless offers a MicroPass technology that can be embedded in stickers that are affixed to mobile phones so they can be used to make payments or access transit systems and buildings.

(Credit: Inside Contactless)

I admit it; I've been put off by the term "contactless payments." But it's an emerging area that deserves some attention.

If you are in Asia, you know what I'm talking about. People there have been making payments with their mobile phones using what's called "near-field communications." Just wave the handset in front of a reader and voila, the transaction is done.

In the U.S., we've had RFID technology embedded in cards. But the long-term goal is to eliminate the need to carry credit cards, building access badges and transit cards and just turn the phone into an all-in-one device.

Well, while the mobile phone has turned into an entertainment device over the last few years, it hasn't become the payment and access device in the U.S. that was envisioned when contactless payment strategies were born back in 2005 and earlier.

And now, with the economic downturn, the near-field communications industry is likely to take even longer to take off. Broad adoption of near-field communications will take longer than expected now, as long as three to four years, predicts Shyam Krishnan, an industry analyst at Frost & Sullivan.

So, a French company called Inside Contactless has come up with an interim solution that will let people turn their phones into credit cards and transit cards. Inside's MicroPass technology will be embedded into a sticker that can then be affixed to a phone, wallet, or anything else.

The company, which entered the U.S. bank card market with a microprocessor-based chip in 2005 and is backed by Nokia, Motorola and Samsung, recently announced that Colorado Plastics will be producing stickers using the MicroPass technology.

Soon, we may see people waving their mobile phones, iPods, ID badges, or wallets in front of readers to get on the subway or buy coffee at Starbucks.

"It's a cool way to pay; convenient," said Charles Walton, executive vice president of the payments business at Inside. "It turns the phone into a super wallet."

"It's a card in a different format," said Jonathan Collins, principal analyst in ABI Research's RFID and contactless group. "We've had American Express fobs, but they didn't prove to be overly popular. Stickers are more useful."

The MicroPass technology should fare better with regard to security scrutiny than the much-maligned NXP Mifare Classic RFID chip, which has been found to have severe flaws and can be cloned.

"We're using a microprocessor with open-standard security techniques, not a fixed memory, proprietary security scheme" like Mifare Classic, Walton said. The applications implemented using MicroPass "cannot be cloned in that way."

Adoption will depend on how quickly banks, retailers and phone companies can agree on standards and implementation, as well as on whether people are ready to merge their phone and their wallet.

"There has to be a benefit for the end user," Krishnan said. "It all boils down to its convenience, at the end of the day."

I'd be interested in hearing reader thoughts on whether this technology would be useful.

[Seanathome]

We must serve our corporate masters... or else they will take away our ability to buy things. ;)

[joetesta70]

This is stupid. Poeple in Sweden have been paying via SMS messages to their mobiles for years. Just SMS the car wash or vending machine to authorize and the bill appears on your phone bill.

Why can't we do that??? Oh, yea. VISA and Mastercard, that's why.

[boster13]

Yes, but not everyone has texting still and that would increase people's already ridiculous cellphone bills. Not to mention the many American teens, tweens, and college students still on their parents plans. Many of them would undoubtedly abuse the sms, having there parents have to pay their expenses when they shouldn't be. At least with the card it has to be linked to a bank account which would keep them from abusing it because their parents could just say no to getting them a sticker, while saying no to texting could disrupt a whole subculture of the current generation.

[mobilefuture08]

this is the best way to get it out there. with 10's of millions of cards with these chips in the US, no one knows they have them but a phone sticker is intuitive and convenient to let people know they have this payment technology and easier for them to understand how to use it because its wireless payment on a wireless device. plus you've got 10's of thousands of retailers who have the readers for them and growing and you've got commitment from visa, mastercard, etc, so your more likely to see this succeed and its much better than sms. basically every phone in the US has sms and sms payment has been tried for years but the inefficiency of it, the lack of security, the time comparative issues, and so many other issues make sms a failure for true physical world payment. this sticker is brilliant, and i hope some bank will soon offer this as an add on option to my account like they do with key chains. i just hope they keep the logo small cause i don't want to walk around with a big mastercard logo on the back of my phone, but i can live with a small one and some colors that match up with my phones back, preferably black. i also understand this technology and its ISO are the same for most transit systems and access control systems so this could be the start of something really big with a huge existing infrastructure rather than building an infrastructure from scratch, so that gives this sticker another leg up on succeeding compared to other technologies. if they begin to also bundle it with some mobile apps and services like what you hear is coming from visa and android, then your probably seeing the future of shopping and a bigger value out of visa than just payment but rather lots of things that make shopping better. just my two cents.

[cftilley_dotmac]

It's a good idea and would embrace it if it ever gets implemented here. A wrinkle that needs to be sorted out is around what happens when people lose their phone, etc. I wouldn't want my bank account to be emptied because I didn't notice that I'd dropped my phone.

[mobilefuture08]

actually, there was a study done that showed if you lost your credit card, it would take days on average for you to realize you've lost it but if you lost your phone, you'd realize it was missing faster than realizing your wedding ring was missing. today, your phone is so essential to your life that losing it is less likely and more noticeable than losing your wallet. as for when you do lose it if ever, you simply call the card company to cancel like you would a stolen wallet and you'd still be protected by the same laws of theft you currently have for a normal credit or debit card, which in most cases is $0. also, the phone can add a variety of features that makes it safer to use as a payment device, over a dozen actually. some include sms reciepts to confirm a purchase, or online access to the account so you can see how much you have in your account without going over. so its actually safer than your current credit or debit card in your wallet.

[scherer13]

mobilefuture08 said "so its actually safer than your current credit or debit card in your wallet."

There's one inherent flaw with the argument that if you lose your phone you will notice right away and be able to cancel the sticker's usage. The problem with wireless payment doesn't lie in losing the device/sticker/card, the problem is that the data on the card can be cloned just by walking by the wrong person who has a card reader. Therefore, you can have your account "stolen" even though you still have the sticker and you can still use it.

That's the problem with wireless payment technology.

[TV James]

Can I put the sticker on the inside of the battery cover so that it's less obvious?

I also like the scheme used by PayPal (never used it myself) where you are called and asked to enter a pin to confirm the transaction. That will slow things down, but it might be a nice touch for the first time you shop somewhere new or try to purchase something that costs over a certain dollar threshhold.

[mobilefuture08]

you can't stick it under the average battery cover because its still to thick and also you'd get to much interference as well as a shorter or even zero read range. for now it has to be on the outside but it will accelerate the advent of getting the technology on the inside of the phone. as for the paypal suggestion, the current breed of contactless products from visa and mastercard already have pin or signature requests for payments above a certain level. as well, some of the processors and banks are already working on a remote authorization which will be as fast as the current pin pad at the store but in this case, an application, sms, or web portal will activate after you tap the sticker to the pos reader and will request you input a pin to authorize the purchase.

[c|net Reader]

It seems to me that losing one's cell phone means allowing the finder to make unwanted purchases. That would only make things worse. Is it really so hard to pull out money or a credit card?

[ghosford]

It seems to me that losing one's *credit card* or *cash* means allowing the finder to make unwanted purchases. That would only make things worse. Is it really so hard to pull out your *cell phone*? </sarcasm>

Sounds like the same arguments that were used in the '70s about credit cards. The banks must have the same protections for this payment method as for credit cards.

[VdkaShaker]

As a consumer, yes I want convenience, but I also want security, and reporting (somewhat in that order). When I used to pay cash at Starbucks, they wouldn't automatically offer me a receipt. I realized over time that I had no idea how much I spent there. Now I use a credit card or auto-recharging gift card so I can keep track, and wouldn't you know it, they always offer a receipt for card purchases.

This background may not seem relevant, but it goes to the point that this new device needs to be flexible, secure, and allow me to keep track of my spending. I don't just have ONE credit card (a personal problem?), and at times I want to use my Debit card. How will this thing help me switch between my accounts? Perhaps it can be my primary Debit and Credit card, but I don't know enough yet to say it will really make me carry less stuff and be better than what I currently have. No one has offered me one of the proximity credit cards I see the readers for, so I haven't been able to try those. I use the Mobile SpeedPass and love that, but wish I could use it everywhere. I've even programmed it to know I don't need a receipt at the pump (I can only use it at Mobile, and only use it for gas, so it's reported on my credit card bill). Gas stations require my billing Zip code now, so that's a layer of protection should I lose the SpeedPass. What's to keep someone from using this stick-on access to my accounts if its lost or stolen?

Bottom line, I like the idea of it, but need more information to know if it will really be better.

[ghosford]

I agree that we will need more info before adoption. But I'm sure that will come as the product comes closer to market and banks firm up agreements.

BTW, I solved the receipt-for-cash problem by asking a simple question as I hand them the money: "Can I have a receipt for that?" I have yet to find a business that will not provide one upon request, even if they have to press a couple more buttons to print it out.

[mobilefuture08]

this option actually is more secure than your current credit/debit card, see prior comment. as for the single card versus wallet. your right, but the next step is what's called NFC which will offer a full wallet and this can accelerate that technology to the market. on the other hand, on average, nearly 90% of all consumers use one card to make the majority of their purchases. though nothing is perfect, this would be a first step and if its your main card, then most of your purchases will be made by it. its a solution that can start the revolution, not finish it. its likely to succeed since we've already seen how successful products like mobile speed pass have been. now we just have to see what bank will have the insight and vision to be the first to offer it to customers.

[johnericanderson]

Cool. Now I can lose everything all at once. This is much easier.

[mgargi]

Can anyone explain what happens to the phone's performance when you place the payment sticker's tuned RF circuit proximity of the handsets antenna?

[mobilefuture08]

the sticker is a passive chip requiring power from a point of sale reader via a magnetic field. its frequency is 13.56 mhz so it wont interfere with the phone at all. what it will do is make the phone even more useful.

[dennis_wolfers]

It's a step in the right direction!