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Visa: Why Phones Should Turn into Credit Cards

Gordon Kelly


The Challenge of Turning Phones into Credit Cards

They have replaced PDAs and continue to threaten sales of compact cameras, sat navs and even PCs, but could our wallets be the latest target for the next generation of 'superphones'? We sat down with key influencers at Mobile World Congress to talk theory, reality and security.

The most obvious place to start is Visa. The payments company commands a 68 per share of global credit and debit card transactions and in 2009 alone processed 62bn transactions to a value of $4.4 trillion. Furthermore Visa is the driving force behind the monetisation of NFC (Near Field Communications), the short wave wireless technology being incorporated into cutting edge handsets like the Nexus S, Galaxy S II, Optimus 2x and Atrix. NFC has been publicly backed by everyone from Samsung, HTC and Apple to ZTE, RIM, Motorola and (in particular) Nokia and the GSMA. So are touch payments really set to change the world?

"The good news is we see at Mobile World Congress that the hardware is done," said Visa's innovation vice president Guido Mangiagalli. "We are breaking the chicken and the egg situation and by the end of the year there will be millions of {NFC enabled} phones in the market. This will drive acceptance from merchants to install the terminals."

Visa has already participated in a major roll out in Turkey and the technology couldn't be simpler. It can be built into a phone or added to handsets via sim cards, microSD cards and cases (like the iPhone case Visa launched last month - below). To operate users open an app on their handsets (bank, store loyalty card or Visa-specific) and touch their phones to a shops' terminal. For payments under £20 the transaction is instantly completed and a receipt filed on the users' phone. For payments over £20 the user must enter their pin code on their phone. It is quicker than using a credit card and more convenient than cash.

"In the UK McDonalds is onboard and Tesco announced support this week," said Mangiagalli. "Momentum is really happening on both sides, each is driving the other. Visa has been working on this for more than five years and now we are ready: technology, applications and security."

The last of these will likely be a big sticking point for many. Mobile phones are already attractive to thieves. Why add this functionality and give them even more motivation to lift one out of your pocket?

Mangiagalli says the answer is easy: phones are more secure than credit cards. "The touch transaction is secure," he explains. "More secure than swiping a credit card or typing your PIN numbers into a third party device. Unlike a credit card, to pay your phone never leaves your side, your PIN is entered on your own device and there are no {account and security code} numbers to be copied" - something Visa has tried to combat before. Mangiagalli makes the point that, if stolen, a phone can also be shutdown remotely, that its loss is typically noticed more quickly and protection against fraud is covered by the same safeguards as credit card transactions."

Furthermore this is where security companies come in…

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