The Paperless Wallet – Are You Safe Paying With Your Smartphone?

I had left my wallet in the car, a situation that I was not unfamiliar with. I walked up to the Starbucks counter, gave my order to the barista then held out my smartphone for her to scan and complete the transaction. It took less than a minute, faster than using a credit card or cash, and a receipt was immediately sent to my email. That’s the magic of Near Field Communications (NFC). In simple terms, this technology allows one electronic device to talk with another when they get up close and personal. Sometimes it just requires the devices to be a few centimeters apart, other times it requires a quick tap.
When I initially wanted to use NFC, my first thought was to sign up for Google Wallet. I’m an android user and an avid fan of Google. However after a few minutes of searching I failed to bring up the app from the Play Store. I soon realized the problem, Google Wallet relies not only on the phone’s NFC chip but also its Secure Element (a portion of the phone’s memory devoted to keeping passwords, credit card information and other sensitive data safe) to work. Unfortunately not all phone carriers offer the option to use the app. For example, Verizon has stopped Google Wallet from being preloaded onto its phones and blocked downloads from the Play Store because of this function. In a letter regarding an FCC complaint last year, Verizon asserted that, “Google is free to offer its Google Wallet application in a manner that doesn’t require integration with the secure element, and many payment applications do just that.”
No matter, ten minutes later I was all set up with a free Google competitor called Square Wallet. All it required was signing up for an account, inputting my card information and downloading the app from Google’s Play Store and I was ready to go. The website for Square Wallet offered a comprehensive visual map detailing accepted locations. This technology is found at many large retail stores including Target, Best Buy, Walmart and more.
For consumers, there is a growing concern regarding NFC payments, particularly regarding Liability and Near Field Eavesdropping. Eavesdropping is the act of establishing an NFC connection to make fraudulent transfers. However the range of NFC and the fact that most apps establish secure channels make eavesdropping incredibly difficult.
Regarding liability, I poured over Square’s user contracts but I couldn’t find anything to put my mind at ease. Still, my Square account was linked to my Wells Fargo account which has always boasted a decent set of security components to protect its customers. A quick call to Wells Fargo confirmed that if fraudulent charges were to happen, I could dispute them the same way I would with my normal credit or visa card and wouldn’t be held accountable for the missing funds. Unfortunately this doesn’t apply to preloaded gift cards that have been linked to Square wallet. Users of any NFC wallet service should not only read the user contracts thoroughly but call their banks and ask whether credit card security features apply to the service chosen.
So do NFC transactions represent the future? Not according to PayPal President David Marcus. In an official PayPal blog post, Marcus said that he doesn’t believe that NFC payments will take off anytime soon and I see why some people might hesitate. It can be a bit concerning the first time you make an NFC purchase, particularly if there’s a long line behind you. Will it work? Will it take forever? It’s very tempting to just go with what you know: swipe and sign.
Be that as it may, with my brief experience I would recommend a service like Square for those who regularly visit one of the many retail stores that accept NFC payment simply for its ease of use. I can see myself using the service occasionally but, more importantly for me, it’s nice to know that in the case of a forgotten wallet or credit card, Square has got my back.
Will NFC Communication be the future for retailers? What has your experience been with Square or Google Wallet? Do you use either for your business?
To learn more about NFC eavesdropping please visit nearfieldcommunication.org
*Using NFC payment is at the user’s risk, check with your bank to ensure security with your transactions
Photos courtesy of Square