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Smartphones Won’t Replace Credit Cards Any Time Soon

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As one who is totally fascinated with the intersection of credit cards and technology, I’ve been paying close attention to the buzz surrounding the use of smartphones as credit cards. It’s a burgeoning area and there’s heated competition among companies to be the first to come up with the Next Big Thing.

Google announced its plans for Google Wallet last week, asserting that it was the leader. Within hours, PayPal announced it was suing Google, claiming that a former employee (now in charge of Google Wallet) stole trade secrets and gave them to Google. I barely had time to think about this before Visa claimed that they are the ones who are ahead of the competition. Why do I feel like I’m back in high school where different cliques claimed to be the “real” cool group?

And then there’s Square (an unfortunate name while I’m using the clique analogy). Square and Google Wallet both use mobile devices for payment, but Google Wallet uses near-field communication (NFC), which requires tapping your phone at the check-out counter.

[Related article: Manage Student Loans With Your Smart Phone? Eh.]

Square is using an app called Card Case, so their approach is software-based and doesn’t use NFC. According to a post on Engadget, you have to first make a Square-enabled purchase at a participating merchant. At that point, you’ll get a text-based message that notifies you to install Card Case. When you make a purchase, you click open a tab in Card Case to get the payment process started.

You know what? Square lost me at “first make a Square-enabled purchase at a participating merchant.” Like all consumers, I’m really busy. And I have no intention of spending time at the register fooling around with an app. I also don’t want everyone in line with me to know my name. Apparently, you have to say your name at the check-out counter so your account can be identified.

With both Google Wallet and Square, I can see benefits for the merchants in terms of advertising. I’m not an impulse shopper so I won’t be tempted, just annoyed to see ads on my phone. I don’t want to see an ad telling me I can get another 10 percent off on shoes as I’m heading out the door.

But many people are impulse shoppers, so as a consumer advocate, I worry for these folks. It would be so easy to just keep spending.

I also have security concerns. I’m far from convinced that mobile devices are secure enough—at this point—to be trusted with all of my credit card information.

[Related article: Google Wallet’s Potential Security Hole]

Aside from security, there’s the convenience factor. I can swipe my old-fashioned credit card in less than 3 seconds. Yes, I actually timed it. I’ll admit I’m uber-organized (hate me if you must) so I’m pretty quick to break out the plastic. But really, even if it takes you six seconds, isn’t it easy to pull out a card or your wallet?

So here’s my question to all the companies who’ve been busy coming up with the Next Big Thing: What’s in it for the consumer?

Really, don’t try to sell consumers on an idea that doesn’t yet offer top-notch security. And please remember that consumers are busy and want to get out of the store as quickly as possible. Most of us don’t want to see our phones cluttered with ads or have our whereabouts tracked. If we’re all expected to change the way we pay for merchandise, you’d better darn well make it worth the effort.

Image: Steefafa, via Flickr

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  • lexdabear

    So you imply that Google Wallet, which obviously got approval by MasterCard, is less secure than a plastic credit card (with a magnetic stripe)?

    The link to the security hole article is pretty lame. No one saw the Google Wallet yet. I am pretty sure an insecure Android (rooted / virus) cannot access any credit card information from the Secure Element (separate chip in mobile, same as in your plastic credit card).

    • Beverly Blair Harzog

      Thanks for your comment. And no, I’m not implying that my magnetic stripe card is more secure than Google Wallet. Just that at this moment, there are too many security holes in Google Wallet for me to trust it with all my credit card information. That’s only one issue I have with it.

      My main point is that these companies need to work on creating technology that really improves the consumer’s life. Being tracked or having my phone inundated with ads doesn’t appeal to me. I do think that smartphones will become a viable payment option in the future. Just don’t think we’re there yet.

      • http://www.sytaylor.net Simon Taylor

        You misunderstand the nature of the product.

        Are you inundated with Ad’s when you go to http://www.google.com to search for something?

        They use data for relevancy. The privacy fear is a complete misnomer.

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  • http://www.sytaylor.net Simon Taylor

    There is no lack of people screaming ‘Credit Cards won’t be replaced any time soon’.

    Whilst the need to temper the puppy like excitement of start ups and technology companies actually launching something is valid. Those of us who work in the payments industry know all too well, payments make snails look positively rapid.

    It’s a pretty safe bet that it won’t happen overnight. In 2004 you could reasonably speculate ‘Facebook won’t happen any time soon’. That doesn’t mean it isn’t time to sit up and take this stuff very seriously though.

    Ignore the interest of some of the worlds most disruptive companies at your peril

  • Beverly Blair Harzog

    Hi Simon, thanks for your comments. I’m concerned about ID theft and think Google has some work left to do on this product. Having said that, I’ve no doubt it’s the wave of the future, and I’ll enjoy following the evolution of the product. But again, the technology needs to fit the needs of the consumers. I don’t think they’ve nailed that part yet.

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