“The mobile phone will be a much more secure payment device than the plastic cards we use today.” That is the view of the assistant director of the Retail Payments Risk Forum, in a blog post published this week by the Federal Reserve Bank of Atlanta.
In ‘Dispelling the myths about mobile banking and payments‘, Cindy Merritt says the mobile phone should be seen as a normal method of payment, and one that should be encouraged thanks to its superior security features when compared with magnetic stripe cards.
“First of all, the security functionalities resident in the mobile handset provide authentication capabilities that don’t exist in the current payments environment,” she says. “The ability to add passwords and GPS location functionality to the handset represent additional security controls to accessing payment instruments in the future mobile wallet.
“Today, there are no locks on your leather wallet to preclude a bad actor from stealing your credit and debit cards and using them for illicit activity.
“Moreover, the technologies that enable our current payments are becoming increasingly obsolete and vulnerable to fraud. Card payments grow riskier every day as the United States remains reliant upon mag-stripe technology, which is very easy for criminals to breach and then use to clone cards for illegal payments.
“Because mobile devices will use contactless technology in the form of an embedded computer chip, the mobile phone will be a much more secure payment device than the plastic cards we use today.
“So maybe the idea of mobile banking and payments isn’t that scary—and maybe these things aren’t even that trendy any more. When you get right down to it, the cell phone is just another form factor for a payment.”
The Atlanta Fed, the Boston Fed and a selected group of US mobile network operators, banks and payments networks held months of discussions during 2010 which resulted in the publication last month of a white paper, Mobile Payments in the United States — Mapping Out the Road Ahead, which sets out a vision for the future centred around an NFC-based open mobile wallet.