Mobile payments: A chip off the new block

You may not yet have received your latest debit or credit card delivering a contactless payment option – but already that’s so yesterday; payment via mobile is the next big thing. But what is it, how does it work, and what are the pros and cons? Blogger Stuart Pearcey dips his toe into the latest money management technology to help you to, well, stay in touch…

Money still makes the world go around, but cash is going out of fashion. In its place first came plastic, but progress is knocking on its door with the introduction of payments using that modern maid of all work, the smartphone.

We’re now able to make payments by holding our phones over the retail outlet terminal thanks to something called ‘Near Field Communication’.

That’s evolved from radio frequency identification, or RFID; technology used to record things like vehicle movements, such as railway wagons past a particular point in a network.

NFC chips like the one in the plastic you may or may not have (I’ve been promised one in my credit card in the next few weeks) operate as one end of a tiny and limited wireless link, allowing small amounts of data to be transferred between two devices when they are held very close together.

The result is quick and easy payment for even the smallest items, once the preserve of the pocketful of change. The most universally available is Apple Pay, the functionality of which is inside the iPhone 6 and 6 Plus.

So how does it work?
It could hardly be a simpler form of money management, because it’s no different from using the contactless card you already have. What’s happening is that information about your credit and debit cards is loaded into the app on your phone; Apple Pay on iOS, or Android Pay on Android, for instance. At the point of sale the purchaser simply touches their phone, with the right card identified, to the card reader, and the NFC chip does its stuff with the counter-top terminal.

Adding data to the app could hardly be simpler. In the case of the Android, for example, you’ll just need to confirm a few details. You can even take a picture of the card as part of the process. Making a payment is simplicity itself. Unlock the phone in the normal way (thus proving it’s you that’s spending the money) and the app does the rest, without even having to be opened.

The pros of mobile payment…
It’s more secure, for a start, which has to be a major plus for any money management app. The NFC chip uses a one-off code that is valueless to anyone trying to wheedle their way into your finances. What’s more, there’s no longer any need to use ATMs, which could very easily have skimming devices concealed on them, and therefore present some degree of risk whenever or wherever they’re used.

So why isn’t everyone using it now?
This where the cons come in. At the moment there’s a growing awareness of the
technology, but not yet a buy-in to it. Surely that’s only a matter of time? There was resistance to ATMs once, but they’re almost universally available these days, with numbers growing faster than banks can close branches.

ATM MachineHowever, not all retail outlets are geared up for it, and perhaps we need to overcome our own reluctance about using something new when it comes to dealing with money – we all know about the ‘financial inertia’ we feel about changing banks, so perhaps there’s a similar fear factor behind going mobile.

Behind the scenes it’s like so much about finance, with the large retailers considering their options. This is a world where supermarkets offer insurance and credit cards; why wouldn’t they want to offer their own mobile payment schemes too? No doubt the debate is taking place in boardrooms as we speak.

The other thing to consider is that because of the demand we place on our phones these days, and the work we expect them to get through, batteries can quickly be drained. If you’ve gone the mobile payment route and you’ve no battery life left, you have no means of paying for anything. We’d advise carrying some plastic, or better still one of those handy charging devices which allow you to carry spare power. They’re a sort of ‘get out of jail free’ card for the 21st century.

 It’s hear to stay
Jamie Zielonko, Senior Account Executive with idea cultivation factory FARM, says: “Overall, we do not foresee the mobile payment trend going away; instead, indications are that it will only increase with each passing year. Some bank and retail clients are struggling with the decision to upgrade their equipment. However, the sooner they embrace the new technology, the better position they’ll be in to make the shift to a new era.”

We’d add the thought that it wasn’t so long ago that phones didn’t take pictures or access email. Look how readily we have taken to those activities. And phone a great many people, life is lived with a phone in hand; ultimately customer pressure will come to bear on retailers, and mobile payment will become as universal as the selfie.

Picture: © David Izquierdo | Dreamstime.com