2-Minute Expert: What Are Mobile Payments?
It’s no longer necessary to carry cash around. From wireless payments to apps, modern technology is making cash less important. How can switching from you wallet to your cellphone make shopping easier?
Why mobile payments?
Mobile payments are an easier and faster way to pay because you no longer need to carry cash or credit cards. Instead, a wireless chip inside your phone or an app on it transmits your payment information, which is linked to your checking, savings or credit card account securely.
What is NFC?
One of these wireless technologies is called NFC, or near-field communication, which all but describes how it works. Your NFC phone is held near a payment terminal that accepts these payments, and when a connection is made, the payment terminal gives an audio or visual conformation that you have paid.
The universal symbol looks like four semicircles. If your phone has this symbol on it, it has NFC, but very few phones at this point have the technology because it requires a special chip inside the phone. Phone makers are expected to introduce more devices with NFC this year and in the future. There have long been rumors that Apple will build in NFC in future phones, and a recent slip of the tongue by a MasterCard executive makes it look like a strong possibility for the iPhone 5, expected later this year.
There are several different names for it depending on the payment processor, including Google Wallet, Visa’s PayWave, MasterCard’s PayPass and American Express’ ExpressPay. These are the same used for tap-to-pay credit cards. If you use this technology in your card, you already use NFC.
There was a scare recently about security vulnerabilities in Google's system. But they were more theoretical than real, and Google addressed the problem. Still, no payment system — including cash and credit cards — is without risks.
What if I don't have a smartphone with an NFC chip?
If you don’t have a phone with one of these chips, you still can make mobile payments through several apps. Square is one of the companies that have created their own virtual wallets, which you access by launching the app. It works on iPhone and Android. The only problem is that the store must be using Square’s system in order to accept your payment, which is pretty rare.
Paying a friend with PayPal? Its mobile payment option allows two users to transfer money between their accounts by bumping the smartphones together. You can use this feature on the iPhone and Android versions, but not on BlackBerry.
Finally, Starbucks is another popular mobile payment app. The virtual Starbucks card allows iPhone, BlackBerry and Android users to pay with their Starbucks Cards without having the physical card itself.
Where can I use these apps to pay?
As more devices come out supporting wireless payments, so do the number of stores that allow you to use technologies like NFC to pay. For example, Visa’s website lists 7-Eleven, BJ’s Wholesale Club, CVS, Sbarro, BP, Rite Aid, Hess and McDonald’s as just some of the many businesses where you will be able to pay wirelessly.