Cashless payment for goods and services continues to evolve, and mobile payments are quickly becoming the battleground for new products and technologies that drive consumer and merchant convenience. Such payments ensure rapid payment for credit issuers and other constituents in the transaction chain. Some of these technologies are still evolving and represent truly revolutionary approaches, while others are more evolutionary and rely on applying existing technologies that found new life as part of the e-commerce world.
One example of the latter is near-field communications (NFC). If you're familiar with the "wave your tag here" payment symbols at some gas stations in the United States, then you're already familiar with NFC technology. NFC has been languishing for years as a technology without a home, but mobile payments may quickly change that. As merchants adopt new point-of-sale (POS) terminal offerings to support payment methods such as chip-and-PIN, these terminals will include support for new physical transaction methods, including NFC. Apple introduced its own NFC platform, Apple Pay, as part of the iPhone 6 launch in September. Apple Payplaces NFC technology in the hands of an unprecedented number of consumers. Its gold roster of partners, including the likes of Citibank and Chase, will also spur adoption of NFC as a payment technology.
Mobile Payment Security
From a security perspective, mobile payments need to be viewed with the same cold, rational eye as any other technology. The broad deployment of chip-and-PIN technology for traditional credit and debit cards—long deployed in Europe, but just now starting to make their way into the United States on a large scale—will help increase the adoption of mobile payment technologies. Businesses are upgrading their point-of-sale systems to support chip-and-PIN, and luckily for mobile payments, the new hardware would also support NFC. Another thing to note is that when coupled with advanced authentication, NFC can help mitigate financial fraud such as card skimmers. According to the Verizon 2014 Data Breach Investigations Report, attacks using card skimmers are increasing at a dramatic rate.
Of course, while new vendors are amassing on the borders of the payments empire, the incumbent players aren't exactly resting on their laurels. VISA and MasterCard have released VISA Checkout and MasterPass, respectively, to facilitate easier mobile payments. These incumbent vendors don't directly touch either merchants or consumers, but they're in a position to heavily promote the use of their technologies within the payment applications developed by card issuers, web e-commerce vendors, and other payment platforms. Their collective marketing force has the potential to influence the payments market and to direct standards and adoption rates of future mobile technologies.
New Payment Technologies
While there's no way to know which mobile payment methods will be broadly adopted, there are plenty of hints of what can happen. One possibility is non-currency exchanges, such as Bitcoin, where buyers will be able to use an electronic wallet on their mobile device to transfer virtual currency in exchange for goods and services. A growing number of online retailers, and some brick-and-mortar ones, accept virtual currencies already. Extending this model to an app-based payment method would not be too far of a stretch. eBay is already looking at Bitcoin support within their website, and it's likely that the adoption of Bitcoin payment apps (along with other virtual currencies) is only a matter of time.
Another possibility is the expansion of QR codes for payment. To date, QR codes are mostly used for information request purposes, but there's nothing that prevents them from being used as a contact-less method to present payment information via smartphone cameras and payment processing apps. Yet another direction involves using something other than currency—such as reward points—as payment. Cabs in New York City already allow patrons to pay with American Express Rewards points, and it's likely that we'll soon see American Express and other issuers creating their own mobile device apps to drive brand loyalty by allowing users to pay for everyday items with their accumulated reward program equity.
The mobile payments field is getting bigger and more saturated every day, but the companies entering the space are providing a vast ecosystem of technology options that make the future of mobile payments incredibly bright. Just as mobile devices have made countless other technologies obsolete—from calendars, to books, to calculators, to cameras—it's clear that they will, at least partially, overtake traditional payment methods in the future. The increase in mobile payments mean it is important for security professionals to start thinking about how they will secure the new technology.
Credit and debit cards still rule the roost when it comes to transacted payments. But this glut of new technologies, coupled with vendors and services providers who are eager to take advantage of them, means that mobile payments are likely to become ubiquitous, and squeeze out more traditional payment methods over time. If consumers start thinking that mobile payments are safer than using regular credit cards, then the shift will happen all the sooner.
Will incumbent payment providers be able to take advantage of this wave by capitalizing on these technologies as well? Only time will tell.