I once thought that using a cellphone or smartphone to pay for things, instead of a credit card, was a bad idea.
We already have the very functional credit card, which is lightweight, doesn’t take up much space, doesn’t need a battery, doesn’t break when drop, doesn’t cost much to make, doesn’t cause anxiety when scratched. Where is the logic in replacing it with a piece of hardware that can cost $400-plus, needs a battery, and is apt to stop working when dropped?
You pull a credit card out, you have it swiped or slide it into a card reader and punch in a PIN. In contrast, a smartphone needs to have a battery that’s charged, has to be turned on and, if you are practising good smartphone security, unlocked with a code or fingerprint. After that, you have to launch a payment app and you’re still just getting started.
But an article at macworld.com by Marco Tabini has clarified things for me.
The only problem is that the system he is arguing for doesn’t exist.
Credit cards are not that secure: Witness the constant news about card numbers being stolen from merchants. The new chip and PIN cards that are now commonplace in Canada have improved security. Before a purchase goes through, you put the card into a device where the chip is read, and then you enter your PIN.
But that process is far from ubiquitous. Around Victoria, there are still places where cards are only swiped. In the United States, the chip and PIN system is only starting to roll out. So your card is still vulnerable at many stores, especially if you use it in the U.S.
The macworld.com article argues that a smartphone system would be more secure. Instead of relying on a merchant’s card reader to communicate with the credit card company, your smartphone would do the communicating; you punch in a code that authorizes the transfer of funds to the merchant. You don’t have to worry about a hijacked merchant terminal, or handing over personal information to a merchant with poor security.
Here’s the payment process as proposed by Marco Tabini:
“The cashier scans your products, and your total appears on the cash register’s screen alongside a barcode that you can scan with your phone’s camera. A dedicated app asks you to confirm the purchase with your PIN, then contacts your card issuer over the Internet and authorizes the transactions. The authorization is relayed to your merchant’s cash register, and the entire process is completed in essentially the same amount of time taken by a traditional swipe transaction.”
I’d be willing to switch to such a system.
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A Wall Street Journal article explains why the United States is so far behind Canada and Europe in adopting chip and PIN credit cards.
Part of it is inertia and unwillingness to pay the costs. It’s also because other markets had higher fraud rates and as a result had greater incentive to switch sooner. With those other markets using more-secure cards now, fraudsters have shifted their attention to the U.S., encouraging banks and businesses to embrace chip and PIN as well.
The new cards are starting to arrive, and should be in widespread use by October 2015, the credit card industry says.
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