Near Field Communication: The end of the credit card?

Oct 25, 2011   //   by Keith McDonald   //   Credit Cards  //  Comments Off on Near Field Communication: The end of the credit card?

Mobile payments, end of the credit card?The tide is turning towards the next phase of financial transaction technology. It now remains to be seen whether this spells the beginning of the end of the trusty plastic credit card, or whether consumers will resist in number.

With the increasing number and popularity of mobile apps, major financial bodies have been looking towards innovative new payment systems for mobile devices.

The launch of these new mobile payment systems could now spell the beginning of the end for the traditional credit card.

Commonwealth Gold, American Silver

Last month, Google launched ‘Google Wallet’, an application designed to make payments easier for consumers while offering retailers more ways to offer loyalty programs. Its system, developed using Near Field Communication technology (NFC), is expected to reach the UK by early 2012.

In terms of development, however, they may be beaten to the chase by Australia’s Commonwealth Bank, which today launched ‘Kaching‘, an app which allows smart phones / iPhones to connect with cash registers and to make payments by email and Facebook. It will be available within two months to iPhone users with operating system iOS4 or above. This would make CommBank the first commercial provider of such a mobile payment system.

Commonwealth Bank's KaChing App

How does it work? Payments on Kaching are enabled by adding iCarte to the handset, which allows purchases up to $100 to be made by tapping a phone where MasterCard PayPass facilities are present.

It is estimated that there are 42,000 such readers and more than seven million MasterCard PayPass cards currently in circulation. For its part, CommBank claim to have over six million online banking users and that more than 16 million log-ins took place in August alone. No doubt the roll-out of this payment system will see a huge expansion of these facilities.

Meanwhile, Australian giants Eftpos, which accounts for 85% for all debit payments in Australia, has also reportedly undergone a technological revolution, which will allow customers to conduct transactions with mobile phones and contact-less terminals. It is described as the first major change to eftpos’ functionality in a quarter of a century.

Revolution, then, is, quite literally, on the cards.

Britain Bronze, or Bronze Age?

So, to continue the Olympic motif ahead of the 2012 games, America and Australia are readying themselves for the next phase in transactional technology. But does it spell an end for the credit card? In the UK, political scandal continues to play a defining role in the future of British finance.

A vast majority of Brits surveyed recently were wary about using their phones as makeshift credit cards. Recent phone-hacking political scandals in the UK have unnerved consumer confidence in secure telephony, and a poll of over 1,000 consumers revealed that only 17% would be comfortable using their mobile phones as a card payment device. 44% cited the lack of security software as their main concern.

Of the UK respondents, only 11% were uncomfortable using their credit cards to make online purchases via PC, but levels of doubt more than trebled when it came to the use of phones to make payments. Many felt that a phone was more likely to be stolen than a wallet, and had further oncerns about the robustness of security measures that could feature on a mobile device.

It is unsurprising, perhaps, that CommBank reports security as having been of paramount importance in developing their system. Kaching includes password encryption, and no personal banking information will be stored on a user’s phone.

Will Brits willingly follow the rest of the world’s economy into this new age of transactional technology? Will they be dragged kicking and screaming? Moreover, will Britain’s stubborn resistance extend the life of the trusty plastic credit card?

The demographics of the UK survey revealed that the younger generation were more keen to adapt to new technology. A third hoped to use their mobile phones as a credit card in future, while a quarter of under 18s, without credit cards, are happy to use their phones for payment instead of other means.

Testing the Waters

There could be merits in scepticism. Other economies and major financial institutions will no doubt become interested spectators when commercial mobile payment systems begin operating, eager to see what teething problems and security issues will arise. And the recent UK phone-hacking scandal has highlighted the vulnerability of standard mobile phones to third parties.

Google, who appear to be the first conglomerate wishing to unveil a mobile payment facility to the UK, will need to work hard to convince and reassure a majority of UK consumers that mobile payments feel as secure as the material plastic credit card tucked safely away in the wallet.

Does this foretell the end of the traditional credit card? Do you feel comfortable about this turn to mobile payments? Drop us a comment and let us know!

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