The Green Sheet Online Edition

April 23, 2012 • Issue 12:04:02

Moving mobile payments to the next level

By Nicholas Cucci
Network Merchants Inc.

No doubt about it: the future of mobile payments is coming - if not already here. Cash and credit card transactions are extremely inefficient compared to mobile commerce, which is organized. And digital transactions can be tracked. Yet we need a game-changing application that will take us to the next level.

Rationale for going mobile

Mobile processing is a strong solution going forward for a number of good reasons.

1. Increased sales: Customers don't always carry cash on them, and offering another method of payment will only increase sales, especially when the other method offered is more convenient.

2. Portability: Merchants can accept credit cards anywhere they do business. They no longer need to transport hardware or spend thousands on mobile hardware. They simply buy apps or download free apps and install them on smart phones.

3. Secure transactions: Mobile data is transmitted securely. Mobile processing even cuts back on fraud. Checks accepted on the road can get lost or bounce when cashed. And sensitive transaction information used to be handled by multiple people within offices, leaving that data more susceptible to fraud.

4. Fast processing: Setting up and maintaining accounts can be extremely fast. Funds are transferred to accounts instantly, or within a few days.

5. Low cost: Some mobile card-processing services do not have contracts, termination fees or monthly minimums. Some iPhone apps may be free, but charge a monthly fee because the swipe used is hardware encrypted. Overall, the cost of mobile processing is significantly less in every way.

The killer app

We are patiently waiting for that one game-changing solution to make mobile payments a reality. It must be safe, secure and sensible enough to make people throw away their three-dimensional wallets. Sure, solutions like Square Inc.'s dongle and Intuit Inc.'s GoPayment have been released, but we still don't see people jumping in with both feet. What is the game changer?

In March 2012, Apple Inc. received U.S. patents for a technology dubbed iWallet, a digital platform that will give users complete control over their financial accounts directly on their mobile devices. The devices will also deploy near field communication technology. Other new Apple patents cover security measures to keep financial information safe or technology to house all of these new features. (See www.patentlyapple.com/patently-apple/2012/03/part-2-apples-iwallet-the-one-that-will-rule-the-world.html.)

What could iWallet provide for mobile payments?

• Credit card profiles: The Apple platform could enable users to attach credit cards to their profiles, within which they could view their monthly statements, read alerts from their banks and adjust preferences.

• Parental controls: For children who carry smart phones, parents would be able to digitize credit card information so their offspring could use the phones for payments. Parents could set spending limits, either per transaction or overall, and even restrict which merchants a child can buy from. If a child exceeds his or her monetary limit, the transaction would request an authorization from the parent's phone, allowing the parent to accept or decline the authorization.

• Authorization requests: If parents receive many authorization requests, they may have several filtering options, including automatic authorizations below set dollar amounts or at specific merchants.

• Flagging fraudulent purchases: When cardholders find fraudulent activity on their accounts, they are instructed to immediately inform their credit card companies. Unfortunately, that is not what happens in most cases. Account holders do not find out until they receive their monthly billing statements. With a solution like iWallet, users will have the ability to flag questionable transactions, just as we do with suspicious emails. Once a transaction is flagged, the bank is automatically notified and will get in touch with the account holder. While this does not completely eliminate fraud, this preventive measure aims to cut off fraud as it occurs.

All of this seems like a lot to take in. Are the mobile devices in use now capable of handling these types of tasks? Are they even fast enough? I did a little testing of my own. My new Apple iPad reached 4G speeds of 11.19 megabits per second download and 5.59 megabits per second (Mbps) upload, with a latency of 78 milliseconds. These speeds are plenty fast to run tasks like iWallet and more. But the average broadband speed for the United States was 3.0 Mbps for downloads and 595 kilobytes per second for uploads. (See SpeedMatters.org.)

Moreover, significant stretches of the country where advanced mobile networks have not been built out cannot access even 3G coverage, according to a February release by the Federal Communications Commission. Yet there's hope. New FCC initiatives are expected to expand high-speed Internet service to millions of consumers throughout the country by the end of the decade.

Nicholas Cucci is the Director of Marketing for Network Merchants Inc., a graduate of Benedictine University and a licensed Certified Fraud Examiner. Cucci is also a member of the Advisory Board and Anti-Fraud Technology Committee for the Association of Certified Fraud Examiners. NMI builds e-commerce payment gateways for companies that want to process transactions online in real time anywhere in the world. Contact him at ncucci@nmi.com.

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