1 Step Forward, 2 Steps Back

February 15, 2012

We’ve been covering Mobile Payments here at The Official Merchant Services Blog since the very beginning. In fact, the Article Archive at Host Merchant Services has extensive coverage of the topic as well. It’s just too sexy a topic — everybody loves the allure of gadgets — and too fascinating a financial prediction — folks in the know are predicting Mobile Payments to boom in the billions between now and 2015-ish — to not continually cover Mobile Payments.

But I keep picturing a scene from the 1992 women’s sports movie A League of Their Own in my head every single time I look at the state of Mobile Payments in the U.S. The scene that resonates with me is the one where Marla Hooch — fearsome and uniquely striking power hitter for the team — is about to step into the batter’s box. But she’s getting confused. She steps into the box. Then back out of the box. The reason for her confusion? She’s getting contradictory signals from her Manager and her teammate. One wants her to swing away and unleash the fearsome potential of her staggering offense. The other wants her to play it safe and move the runner over for a better chance to score an efficient run. So there she goes, Marla Hooch, the powerhouse of the league. One foot in the box. Then out of the box. It’s the exact problem Mobile Payments currently faces. The power and potential of what it can do for commerce keeps getting highlighted in story after story, research after research. And then the biggest obstacle it faces keeps getting thrust in front of its face: Security.


Step Out of the Box

Google Wallet, one of the biggest lynchpins in the mobile payment industry’s bid to effectively take hold in the U.S. market was recently plagued by a security problem. This article from ExtremeTech notes the issues that happened to Google and its mobile payment system in a piece that discusses the pitfalls of its beta testing. A pair of bugs forced Google to shut down its pre-paid cards and Google Wallet took a huge hit on the nose in the press. This reinforced the public’s view that mobile payments are a bit scary because people think that their personal information — account numbers, social security information, credit card numbers — will get swiped from them out of thin air. The thought process being that if all they have to do to pay for an item is wave their phone in the air at a cash register, some sneaky net ninja can pluck the data right out of the very same air.

The article sums up the problem: “In the last week, there have been not one, but two exploits that could give a malicious individual access to your Google Wallet mobile payment app on Android. While the first is a root-only hack that Google couldn’t really be expected to plan for, the second affects all Android users and is simple to do.”

It goes on to suggest these bugs popped up due to a core problem with how google beta tests things.

Since that story broke, Google has gone on the offensive, and is now stating that the bugs are fixed. As this cnet article says: “Google has patched a hole in Google Wallet that could’ve allowed someone to access a user’s funds simply by resetting the PIN and using a prepaid card. The company said yesterday it has issued a fix that now prevents a prepaid card from being re-provisioned to another person. It has also restored the ability to issue new prepaid cards following a move on Monday to disable the use of such cards.”

These bugs were a major setback for more than just Google. The Mobile Payments landscape is bubbling with interest but it’s also saturated with variety. There are multiple avenues businesses are considering for their entry point into what research firms like Gartner predict will be big money very very soon. One of those avenues is Near Field Communication (NFC).  The underlying technology of NFC is described as: Near field communication (NFC) is a set of standards for smartphones and similar devices to establish radio communication with each other by touching them together or bringing them into close proximity, usually no more than a few centimetres. Present and anticipated applications include contactless transactions, data exchange, and simplified setup of more complex communications such as Wi-Fi. Communication is also possible between an NFC device and an unpowered NFC chip, called a “tag”.” 

This is the technology that Google tagged to be their entry into Mobile Payments. And so these bugs are a major hit for Google and NFC as a whole, taking one of the most hyped aspects of Mobile Payments down a peg in the industry.


Step Into the Box

In the midst of NFC taking it on the chin, Visa and MasterCard unleashed its EMV initiative — as The Official Merchant Services Blog reported on February 7. This is, in my mind, the Mobile Payments Marla Hooch being told to step into the batter’s box and knock it out of the park. Visa is invested heavily into Mobile Payments, and is prepared to drag the industry kicking and screaming into the future of profits that are being predicted for Mobile Payments. The EMV initiative hinges on chip technology being attached to cards, and for Mobile Payment evolution also being attached to smart phones. What Visa’s investment in this avenue brings is added security. This is huge. The security advantage addresses the biggest fear people have for mobile payments. Visa, much like Tom Hanks, wants Marla Hooch to get in there and swing away.


Going Sci-Fi

This article from Asia One adds another wrinkle into payment processing, and possibly the future of mobile payments: Biometrics. The article cites The Monetary Association of Singapore (MAS) as researching ways to make Debit card transactions more secure. And one of the avenues of research has been biometrics. This could really lead to a breakthrough in the march towards a cashless society, including the use of smartphones for mobile payments. Having biometric security measures on your phone would work in tandem with the chip technology that Visa is pushing, making both the unit you use to store the information — your phone — attuned to your own physiology; and the transmission of your transactions — the swipe of said phone in the air — attuned to a secure chip. Identity thieves and card fraud masters would be stymied on multiple ends and have to work very hard to stay ahead of that security curve in their mission to steal your information and then your money.


The Bottom Line

So What’s Marla Hooch going to do? It looks like Google is sticking with its plan and dedication to NFC. They sort of have to due to how invested they are into the technology already. And it’s no secret that Visa is very much tied into the future of mobile payments, chip card technology, and payment processing security. Both entities are full steam ahead. And with that much tech and finance industry strength behind the initiatives, Mobile Payments will get its chance to swing for the fences. We look for the Google Bugs to blow over and not really hinder Mobile Payments growth much at all in 2012.


For more information on Mobile Payments you can read from Host Merchant Services:


The Official Merchant Services Blog will continue to keep you up to date on the latest advances in Mobile Payments technology.

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