On Wednesday, the Globe and Mail reported that a pilot program to test making credit card payments with your smart phone has officially launched. The pilot program is a partnership between Visa, Royal Bank and Rogers Communications.
The pilot program, announced a year ago and getting underway this June, is built upon a simple premise: people use their smart phones for nearly everything these days, so why not allow them to make instant credit card purchases.
The new technology, currently installed in only a certain type of Motorola phones, uses near field communications whereby a tiny chip inside the phone interacts with a sensor on a retailer’s payment terminal. Transactions take only seconds to complete, and receipts can be delivered over SMS.
Though the amount of retailers accepting these new payments is unknown, any store that use Visa’s new payWave terminals (which use a similar chip installed on a credit card) will be able to accept mobile phone payments.
The convenience of this new system is hard to argue – speed and portability allows the consumer to carry less, and move through lines quicker. However, the main stumbling block remains ensuring the security of the new smart phone transactions.
Transaction data from the new chips will be encrypted, not visible to the carrier or the retailer. What’s more, there will likely be an unlocking or password required for charges over $20, and other precautions set against fraud or lost devices. But consumers may still be wary to send their financial information over unfamiliar airwaves.
“The data is stored and transmitted in an encrypted way, so when the phone is being waved in front of the point-of-sale terminal, it’s not your number being transmitted, it’s an encrypted version,” explains Mike Bradley, vice-president of products at Visa Canada. “It’s always a balance between security and convenience. If you ask consumers about security, they want more of it. But when they are asked to make tradeoffs with usage, accessibility and convenience, that’s where the forced tradeoffs are required.”
The final hurdle, naturally, will also be availability. Before something like this catches on in the mainstream – and we see no reason it won’t eventually – more phones need to be manufactured with the chips and software installed, and more credit card companies need to launch their own versions of Visa’s pilot program.






