A few weeks ago, Starbucks officially announced their mobile application, Starbucks Card Mobile app, available on the iPhone, iPod touch and select Blackberry phones.  Not wanting to wait for Near Field Communication (NFC) to come to full use (NFC requires a lot more than two way communication between the mobile phone and the retailer), Starbucks decided to utilize existing technology, 2D barcodes, for their new app.

NFC Versus Barcode Scanners

Let’s step back a minute to the basics.  NFC employs “tap and go” technology, where the NFC-enabled phone just needs to be within a short range of the NFC reader.  An application needs to be open on the phone to enable the 2D barcode scanner.  NFC, unlike a barcode scanner, is a two-way communication system.  NFC technology also enables mobile users to download information, either from the NFC device or from ‘smart’ posters (i.e. train schedules, restaurant locations).

The Starbucks Example

Back to the 2D barcode solution.  How the Starbucks app works is pretty simple.  Before making a purchase, the user sets up an account (linked to a gift card number) at Starbucks.com and funds it (using a major credit card or PayPal).  Assuming the user already has the app on the phone, he adds the card information to the mobile app.  At Starbucks, the user brings up the card account, enters a security PIN (optional), and allows the scanner to read the barcode.  The purchase is communicated to the user’s account and then the mobile phone syncs (which can be in set intervals – once a day, etc.) to the user’s account.  The app also allows users to view their account information and reload the card with a major credit card.  One neat thing about this type of set up is that more than one user can use the same card account.  Instead of having three different cards, each person can use the same account, using the app on their mobile phones – or one person can use the physical card if need be.

Using the Starbucks example, it sounds like an easy transition for retailers to process purchases using the 2D barcode scanners.  Since everyone walks around with their cell phones practically glued to their hands, consumers are less likely to leave their cell phones at home than their wallets.  Most people are also trying to minimize the number of cards they carry and check out faster, so waving a cell phone at a reader makes perfect sense.   Why is it that more retailers haven’t employed this type of mobile payment technology?  Apps, such as CardStar, which can store reward card data on mobile phones, are already out there.  Unfortunately, a lot of retail scanners are still old school CCD readers and not 2D scanners.  Ah…yet another hardware upgrade for merchants to stay current.

If retailers did go this route on their own, these types of transactions would be in a closed loop environment like Starbucks.  (Closed loop cards are accepted only by that retailer, i.e. Starbucks.  Open loop cards, i.e., major brand credit and debit cards like Visa, can be used at any retailer accepting that type of payment.)  With most closed loop cards, the user needs to have an account with that retailer and ensure that there are funds available on the account.   Therein lies the conundrum of too much work for the consumer and the complexity of having too many accounts along with the retailer having to purchase new hardware.

So you think that it would almost make sense for the credit card companies to employ the same type of technology in the meantime.  Most banks already have mobile apps (account access, transfer money, pay bills, etc.).  Why can’t credit card banks (i.e. Bank of America, USAA, Discover, Amex) build mobile apps that would simply require a PIN to process a transaction using a mobile phone?  Well, it’s not as easy as that.  There are many players involved in a credit card transaction, with everyone getting a piece of the revenue pie.  Plus, credit card transactions are an open loop system.  Besides having the NFC-enabled handsets available, enabling mobile payments in an open loop environment still has a lot of kinks to work out.  Until that is settled, mobile users will have to settle for other contactless solutions.

How Will NFC Payment Ability Become More Available to U.S. Consumers?

While NFC has been available since 2004, it is widely used only outside the U.S. in countries like Japan and Korea.  In most cases today, NFC is still tied to a separate closed loop account that has to be fed using other funds.  NFC payments have been successfully tested in a variety of areas, most notably in transit systems in London, Germany, San Francisco, Dallas, Atlanta, New York and Philadelphia.  A recent NFC Forum white paper reports that Frankfurt currently uses NFC technology with the Handy Ticket service for their RMV public transport system.  Users who have NFC enabled phones can purchase tickets and download transit schedules.  The users are then billed at the end of the month for any tickets purchased.  (One caveat for the merchant – they have to wait for revenue; but then again, it comes in a lump sum.)

Like a cat and mouse game, the systems aren’t quite in place yet in the U.S. because the technology (i.e., NFC capable phones) has not been readily available.  Contactless, open-loop, payment options, using Visa payWave and MasterCard PayPass are out there, but these cards use RFID chips.

Even though Google has implemented NFC into its new Android phones, the Nexus S and next generation Android OS, and Apple has plans to include it on the new iPads and iPhones, NFC-based mobile payments rely upon the convergence and agreements between all parties involved, including phone manufacturers, wireless carriers, merchants and banks.  According to Bob Egan of The Sepharim Group, “NFC in handsets is meaningless without the rest of it, including agreements between parties, infrastructure, processing procedures for data, security and reconciliation of accounts.”

Retailers are fully aware of the benefits of mobile apps, so adapting to accepting NFC payments may not be that big of a hurdle.  However, many are likely holding out for NFC phones to be more commonplace before investing in new technology (i.e., NFC readers, designing “smart” posters).  Not to mention that U.S. consumers are a bit reluctant to have credit card data stored in their cell phones.  Banks, alike, are concerned about the data security of their customers.  One thing that is clear – mobile users will be more confident using a bank-issued mobile application anyway.  So, we wait.

As far as the Starbucks app goes, it is not yet available at the drive thru window or non-company owned stores (i.e. in the grocery, bookstores).   For Android users, a third party app, the Starbucks Card Widget, is available until Starbucks releases the Android version.  While Starbucks is at it, maybe they can also add the ability to sync the menu to the phone (even if it is pushed from the online site) and provide a way to place an order using the mobile phone.  Soon, there would almost be no need for us to speak anymore.  Our mobile phones will do all the talking.

The innovation of contactless payments has brought several options forward, most notably including RFID and NFC technology.  RFID cards (i.e., contactless smartcards) came to light with MasterCard’s PayPass and Exxon/Mobil’s SpeedPass.  Concerns with these cards include data security, to include card loss/theft.  Thieves have adapted (as they always do) and use RFID readers to steal card data, needing only to be close by (near you at the mall court or coffee shop) to snatch your info.  One suggestion offered is to wrap your RFID card with aluminum foil to prevent RFID theft.  Another is to use a RFID blocking wallet or shield.  As a result, some consumers have abandoned the RFID cards all together in favor of the old fashioned magnetic strip cards.

NFC technology, targeted for mobile phone usage, is slowly coming about.  While RFID can only transmit data, NFC can also receive data.  This key feature requires a password or PIN information to enable the payment, thereby adding a level of security important to consumers.  NFC can be used a few different ways, but the current plan by mobile phone manufacturers and wireless carriers is to have NFC embedded within the mobile device.

NFC phones are not entirely new, but the technology is finally gaining some ground as popularity grows.   Not surprisingly, the U.S. is behind other countries as this technology already exists in other countries.  However, NFC-enabled phones are still in limited use.  Samsung, Nokia and a few other manufacturers have NFC phones available outside the U.S.   Some carriers are taking the initiative and not waiting for phone manufacturers.  Softbank, Japanese wireless carrier, introduced a NFC sticker for the iPhone 4 and communicates with the FeliCa payment system.  There are concerns about how effective the sticker will be if the phone is within a case (protection used by a good portion of smart phone owners).  Maybe the iPhone 5 will be NFC-enabled.

Google, who seems to be taking leaps over Apple, introduced a new Android touch screen phone, the Samsung Nexus S, which was released on Dec 16 in the U.S.  It features a NFC chip and “tap and pay” ability and is available locked or unlocked (obviously more expensive) with T-Mobile.  The company has also launched Google Places, providing retailers with window decals that are NFC enabled so consumers can find them.  The one hurdle for retailers is the need for NFC readers, which are fortunately now being combined with magnetic stripe readers.

The trend that keeps growing involves credit card companies getting pushed out of the loop, as mobile carriers and shopping sites introduce new payment technology and enable alternate payment options.  PayPal continues to grow at 300% annually, and Isis, a joint venture between AT&T, Verizon and T-Mobile to enable NFC mobile payments, was announced in November.  In my August blog, I discussed the joint venture (known as Project Mercury at the time) and their partnership with Discover and Barclay’s to process the payments.  Unfortunately, they do not plan on having anything available until mid-2012.

No matter what the new payment vehicle, it will come when it is ready.  The storage of payment data, whether on a device or online, will always prompt some security concerns.  Wireless phone manufacturers and carriers have been careful about releasing new capabilities, trying to couple innovation with data encryption so as to prevent theft but enable payment evolution.  Before we know it, all computers will come with NFC technology and you will be able to use your mobile phone to shop instead of entering your credit card data online.  However, I wouldn’t leave your wallet at home just yet.

In 2008, Juniper Research forecasted that mobile payments would reach $600 billion globally by 2013.  Mobile contactless payments have been in place in other countries (Korea, Japan, Spain) for some time and the demand in the U.S. has been increasing, especially with the growth of the smartphone market.  Discover has been trying to increase their market share using reward programs and partnerships, so what better way than to jump on the mobile payment wave?  Joining the leading wireless carrier and cell phone provider partnership is a smart move.

About the Technology

Contactless payments have actually been around for a while.  Introduced with Mobile (Exxon)’s Speedpass in 1997, the technology has only recently evolved and become more popular for several reasons.  Consumers want faster ways to conduct face-to-face transactions.  People are constantly on the move and standing in any line to make a purchase is considered an inconvenience.  There have been recent advances in Near Field Communications (NFC) technology, a more secure payment method for mobile devices.  (Basic RFID was used in the previous contactless cards and devices.)  Merchants are trying to find ways to circumvent interchange and association fees from Visa and MasterCard.  (Merchants persuaded Congress recently to approve a cap on interchange fees.  An antitrust lawsuit filed in 2005 is still pending.)

To enable mobile payments, the mobile phone is equipped with a smartcard which contains payment card data.  Merchants would need to have a compatible payment card reader and, to help prevent fraud, a PIN would be required to complete a transaction.  For merchants already accepting contactless payments, most existing readers are supposedly compatible with NFC devices.

The Faster, Faster Checkout

Some retailers have already instituted Visa’s No Signature Required program and MasterCard’s Quick Payment Service, both of which do not require signatures for swiped credit card purchases ranging up to $50 at certain merchant categories.  Skeptics claim that this business practice can increase fraud, since a cardholder signature is used as proof of purchase at a brick and mortar merchant and most fraudulent transactions start out in small amounts.  Gas stations have long employed this practice, but usually require a billing zip code for fraud prevention.  In this case, a PIN is not enough protection for one group of consumer advocates.  Each country has its own set of government regulations with regards to mobile payments and consumer protection.  Nothing currently exists in the U.S.  Recently, Consumers Union, the nonprofit publisher of Consumer Reports, has requested that regulators “use their current statutory authority to ensure that existing consumer protections are applied to all new payment methods.”  They are also asking that companies providing the payment systems provide consumer rights in their contracts for “zero liability” to the cardholder.  With the current government administration’s involvement in financial matters, a lot more work may need to be done before this becomes reality.

Sharing Revenue

One challenge with this new payment channel involves basic business.  Right now, the major card networks, issuing banks, and payment processors earn the bulk of the revenue from card transactions.  Contactless payments using mobile phones introduces new players – wireless carriers, phone manufacturers, and application providers.  Why wouldn’t the players enabling the mobile payments want some of the transaction revenue?

The Privacy Issue

Retailers and consumers both like the idea of mobile payments when it comes to faster checkouts.  However, they may differ on the amount of information shared.  Retailers would love to gather more information about their customer and the transfer of CRM data wirelessly is the easiest way to do that.  Consumers however, may not want to share anything else about themselves.  Mobile payment applications could limit the amount of data stored, or allow the customer to control what data they want to share, such as loyalty card information and purchase history.

With fraud being a common concern amongst consumers, it still may be a while before mobile payments using NFC really take off.  Sure, there will be the early adopters and people who are tapped to do trials (Discover used employees last year to trial its mobile contactless sticker where Discover Zip payments were accepted).  Adoption requires all the pieces be in place  – consumers with Discover accounts who are also using mobile phones equipped with the NFC payment technology and merchants who have the equipment and capability to accept contactless payments from Discover.

Per Bloomberg, trials for the project, named Mercury, might possibly take place in Austin, Minneapolis, Salt Lake City, and Atlanta, starting in mid-2011.

“….the algorithm used to encrypt GSM phones is over 20 years old.”

Mobile payments are a hot topic, particularly for companies and merchants targeting the unbanked – or underbanked – segment.  Research by Mercator Advisory Group shows that 68% of consumer payments (by dollar volume) will be electronic-based in 2012.  The group estimates that volume to be 75% by 2017.  Electronic payments offer huge cost savings for merchants, as well as financial institutions.  Consumers are demanding more ways to operate remotely as well as easy ways to make payments.  It’s a win-win for both sides.  However, the fraud issue cannot be ignored.  Since smartphone technology is fairly new, few anti-fraud tools have been developed and even fewer have been deployed.

As smartphones provide access to more sensitive data each year, the need for security is of monumental importance.  There is some protection available for mobile phones, such as McAfee’s VirusScan Mobile (for Windows Mobile phones) and the VeriSign(R) Identity Protection Access for Mobile.  While these programs protect the phone against viruses, worms, spyware and malware, they do not encrypt data being sent or received.  However, VeriSign’s application does use a two-factor authentication tool and iPhones are equipped with Remote Wipe, which can erase the phone’s data remotely, should the phone be lost or stolen.

There are varying levels of security issues, depending on the type of mobile payment (mobile web site, contactless, SMS, etc).  Vulnerabilities of standards, infrastructures, platforms, and technologies (i.e. GSM, NFC, SMS, Bluetooth, RFID, mobile applications, etc.) pose a complicated issue for researchers to develop protections against secure data loss.  Mobile malware and spyware, Trojans, phishing attacks and third party applications add even more threats.

The future of mobile payments, tagged sometimes as ‘m-payments’, would have credit card data embedded on the SIM card or on a chip in the phone.  (Fingerprint scanning is envisioned further into the future.)  Remote access to the phone and its payment applications would be necessary should the phone be lost or stolen.  This would require agreements between carriers, equipment manufacturers and financial institutions.  Additionally, organizations that deal with sensitive data (i.e. financial, medical, personal identification) would still have to comply with various regulatory requirements (such as HIPAA and SEC) for protecting data.

A new industry consortium, the Financial Services Technology Consortium (FSTC), formed in 2009, is tasked with developing standards for secure mobile payment transactions, regardless of the device or carrier.  Jim Pitts, managing executive of the FSTC’s Payments Standing Committee (Payments SCOM), stated that the standards may also recommend that individuals be authenticated before making a purchase.  Standards will likely include the use of a SIM card or data chip to authenticate the device and authorize the payment.  Due to various technologies and products in use today, the costs required by all parties will likely cause delays in the standards being accepted as well as compliant products and services being deployed.

In the UK, the migration to EMV technology has reduced fraud in face-to-face transactions since EMV adoption in 2003.  The EMV standard operates with EMV-compliant cards (which have embedded chips instead of magnetic stripes) and EMV-compliant POS terminals.  The chips require a PIN entry for a secure EMV transaction.  The acronym EMV is derived from the initial letters of Europay, MasterCard, and Visa, all of whom cooperated to create the technology standard.  MasterCard merged with Europay in 2002.  JCB and American Express have since joined the organization as well.

EMV is a perfect example of two-factor authentication, where two different factors are required to complete a transaction, and has been referenced as a key solution for secure, fraud-resistant transactions.   There is a strong push for EMV abroad and to encourage merchant acceptance, merchants are held responsible for fraud resulting from any non-EMV transactions.  As more countries adopt EMV technology, they are also banning signature transactions.  Australia will ban signatures by 2013.  Canada will not accept magnetic stripe transactions after 2015.  These added security layers will push payment card thieves to focus on easier targets, such as the U.S.  EMV employed as the only method for secure face-to-face transactions abroad is also altering how U.S. cardholders are conducting (or abandoning) transactions in these countries.  This could result in lost revenue for international merchants and will hopefully put the pressure on issuers and merchants in the U.S. to adopt EMV.

“Australia will ban signatures by 2013.  Canada will not accept magnetic stripe transactions after 2015.”

Ecommerce Data Protection

According to the U.S. Census Bureau, ecommerce sales in 3Q 2009 were estimated at $32 billion, 3.7 percent of total retail sales – an increase of approximately 2.1 percent from 3Q 2008 while total sales decreased in the same period.  Visa, MasterCard and JCB already have 3-D Secure protocols in place for online purchases.  Verified by Visa, MasterCard SecureCode and J/Secure (JCB) all require the cardholder to enter a password or unique ID to complete a transaction.  Cardholders must register with the programs for the extra layer of security to be added during a transaction.  Unfortunately, these programs have not been well received or implemented due to added costs to the merchant and low acceptance from cardholders.  In response – and to support EMV online – MasterCard has developed their Chip Authentication Program (CAP) and Visa has created their Dynamic Password Authentication (DPA), a different version of CAP.  To date, deployment has been minimal.  Last week, ArcotOPT was announced as the first solution using CAP on mobile phones for ecommerce and online banking.  Although the company, Arcot, is based in California, the product was released in Europe where EMV has a strong presence. We are not likely to see deployment in the U.S. until EMV takes hold here.

Going Contactless

As contactless card adoption grows (mostly in the small ticket market – fast food, convenience stores, etc.), so does the acceptance of the added security already in place.  Contactless cards include a unique CVV for each transaction.  If thieves were to obtain the payment card data from a transaction, the CVV could not be used for another transaction.  Additionally, contactless payments do not transmit the cardholder’s name and some also do not include the account number.  MasterCard teamed up recently with RIM to deploy MasterCard PayPass contactless stickers on Blackberry phones.  After each PayPass transaction, a confirmation email with the transaction information is sent to the Blackberry phone. Verifone has combined its end-to-end encryption solution, VeriShield, with EMV to support contactless payments beginning this spring in the UK and a few other regions.  End-to-end encryption does not supply any usable cardholder data to a merchant’s POS device or network, thereby reducing fraud risk.

How About Mobile Shopping?

Smartphone technology, not to mention the iPhone, has significantly increased the interest in mobile payments.  Presently, contactless stickers can easily satisfy this demand (as mentioned above with MasterCard and RIM).  Some major card companies have also tested near field communication (NFC) as a contactless payment option. NFC is a short-range wireless technology which enables the exchange of data.  Payments using NFC also require a PIN to complete the transaction.

It is apparent that various options for added payment security are already available. As to why these new security options are not yet deployed in the U.S. rests on the concern for cost and revenue stream.  Mobile carriers want a piece of the pie when transactions are made using devices over their networks, thereby slowing the adoption in carrier channels.  EMV would certainly incur costs for merchants (new POS devices) and card issuers (new cards with chip technology).  Despite these new security protocols, a strong fraud risk still exists with merchants, processors and companies storing sensitive data (against PCI compliance), as well as physical cards being cloned or skimmed.  Costs associated with fraud in the U.S. today are written off as a cost of doing business. Pending government legislation, card association guidelines and PCI compliance appear to be the only factors pushing for faster adoption of stronger security measures.

Okay, so what exactly does that mean?  Well, traditionally, merchants only had the option of accepting electronic payments online in the form of bank drafts, and debit and credit cards from the major card brands – Visa, MasterCard, American Express, Diners Club and JCB.  That is until payment product innovators discovered that merchants were losing potential business from consumers who did not have bank accounts or credit cards.  Most importantly, in the ecommerce space, some consumers are simply wary of using cards and bank account information for online transactions because of the fraud risk.  Most of this concern stems from consumers’ lack of trust in web site security.  Additionally, with card companies cutting cardholder credit limits, alternative payment methods are the only option.

Merchants:  Think Outside the Credit Card Box

Merchants not offering alternative payment options online are limited to accepting cash, money orders or checks from those customers.  Checks require clearing and cash can only be paid in person.  Those options can delay revenue (or limit or restrict revenue in the case of a check not clearing) for the merchant. Merchants offering payment alternatives reach a wider consumer base and satisfy more customers as a result.

Merchants operating ecommerce portals should consider two avenues when researching and implementing alternative payment options:

• Offering a variety of payment methods, such as PayPal^™, Bill Me Later^®, Google^™ Checkout and RevolutionCard (a physical card and new payment network)
• Enabling the acceptance of foreign currency

PayPal^™ has a large consumer base of roughly 150 million users.  Bill Me Later^® was acquired by eBay (PayPal’s parent) last year.  RevolutionCard^™, the first PIN-based credit card, is not embossed, so no personal data is stored on it.  There are smaller players in the market as well, but they have yet to take as much hold as these industry leaders.

Click and Buy, a payment system based in London, offers 126 different currencies and 46 different payment methods to their merchants.  According to an alternative payment study conducted by YouGov for Click and Buy, more than 50% of regular online shoppers will cancel a potential purchase if their preferred payment method is not available.  Although U.S. online retailers are not pressured as much for foreign currency acceptance (major brands are accepted internationally, but cardholders are charged foreign exchange fees), it would certainly enable a merchant to grow globally.

Ecommerce merchants are becoming favorable to alternative payment offerings, simply to reduce their expenses in relation to interchange fees, which have risen 25 to 90 percent (depending on card type and a merchant’s business operations) over the last 20 years.  PayPal doesn’t pass along interchange fees and Revolution Money’s RevolutionCard saves merchants money by charging no interchange fees and lower processing fees per transaction than major card brands.  Merchants are turning these savings into loyalty and cash-back programs for their customers.

Looking Forward:  The Future is a Bright Alternative

Innovation in alternative payment products has been primarily outside the banking world.  Research consulting firm Celent estimates that by 2012, banks will see a decline of $1.2 billion in interchange revenue due to increasing acceptance of online alternative payments. Banking institutions are adopting alternative payment options of their own – for their customers as well as merchants.  Secure Vault Payments, a new payment solution, is now offered by NACHA, the electronics payment association that oversees the Automated Clearing House (ACH) network, (the electronic network for financial institution transactions in the U.S.)  Labeled NACHA SVP, it is an up and coming contender in the alternative payment space.  It is helping banks to retain customers and expand their merchant offerings.  Still in its infancy, it has become popular in the education industry.  The University of Georgia launched SVP in April as a new tuition payment option.  Other educational institutions are following suit.

Celent also estimated that by 2013, online payments will climb to $268 billion and 30% of those payments will come from alternative payment sources.  This increased market acceptance will certainly move alternative payments into the mainstream.

Although many large retail chains such as Regal Cinemas and McDonalds have the technology available, the process has been put under a great deal of scrutiny because it is said to be more susceptible to identity theft and other types of fraudulent activity. The devices are easily hacked using a wireless frequency. Regardless of the security risks, all the major credit card companies were ready to get their piece of the action. In July of 2005, AMEX launched ExpressPay, which was quickly ditched because of a lack of response by consumers. The Discover Network released its Zip technology, Visa Inc released payWave, and MasterCard has PayPass.

MasterCard Mobile recently released its Secure Set-up for MasterCard PayPass on mobile phones. They call this the Over-the-Air Provisioning Service, and it is the first program to enable issuers to perform over-the-air personalization of their cardholders’ mobile devices. Mobile MasterCard PayPass enables mobile devices to perform payment transactions at merchant locations with PayPass enabled point-of-sales terminals. In order for account holders to use their mobile phones to make purchases, their mobile phone must be equipped with Near Field Communications (NFC) and a mobile data subscription. First, the PayPass application is downloaded onto the consumer’s mobile phone. The application is available through their issuing banks website. Then, the PayPass application is personalized with the consumer’s individual account details.

With the wide range of savvy hackers out there, it may still be hard for consumers to feel safe about the contactless payment technology – whether it be on a mobile phone or on a credit card. As for merchants, my advice is hold of off on buying your contactless equipment just yet.

Previously, I have talked about Google’s Android platform working with Visa on a service that sends you an alert if any payments have been made on your Visa card. This is great in helping to protect against fraud, and will also help in locating ATMs, but I don’t consider this to be a new technology.

In 2007, Visa partnered with Qualcomm, a wireless chip developer, to create technologies that allow consumers to make credit card transactions with a cell phone and a reading device. This would add another way for wireless carriers to make additional revenue by being paid a percentage of the transaction.

Now in 2008, in Brazil, Visa announced the availability of remote payments by Banco do Brasil. The service allows Visa cardholders to pay with their mobile device and confirm the transaction via text message. In Korea, T-Money provider Korea Smart Card Company, card issuer Shinhan bank, and Korea Telecom Freetel have partnered to make it possible for commuters to add funds to their T-Money balance automatically on their cell phones. T-Money is a rechargeable card used to pay for the Korean transit system.

Here in the United States, Visa is in a pilot program with Chase Bank to provide personalized offers sent to cell phones via SMS text giving discounts and special deals from online merchants. I wonder if standard text rates apply to this. I am not a big fan of this program but I can see how it can enhance advertising for businesses.

Visa is also working on providing NFC (Near Field Communication) with several large banks across the United States. NFC is a short range high frequency wireless communication technology that enables the exchange of data between devices. This technology is most frequently used for mobile phones.  This technology is also in its pilot stages in France with “Payez Mobile” and in Spain using “payWave”.

Is this mobile technology going to cause an increase of stolen cell phones and future security issues? Is cell phone payment technology going to be the way of the future?

Visa and MasterCard have developed ways to improve the security of online transactions. Verified By Visa and SecureCode allow the card holder and card issuer to authenticate each other. This is done by exchanging digital secure certificates. Card holders can be assured that they are dealing with a real merchant and conversely provide a merchant with proof of a real cardholder. A digitally signed record of the transaction is created. Most issuing banks encourage card holders to sign up for these programs and many online merchants give consumers the opportunity to sign up before they proceed with payment.

Using these services is quick and easy. Card holders select a private password which they use to shop online with participating retailers. No additional software is needed for this added security.

MasterCard has recently decided to deploy Actimize, a provider of transactional risk management software for the financial services industry. Actimize has a debit fraud solution, real-time risk scoring and fraud prevention service for PIN-based transactions offered by MasterCard to its customers. This program is unique because the technology detects fraud and suspicious activity at the card, device, account level and many other dimensions.

Although a huge push for regulation of the Associations is being pushed through Congress there is no better way for a merchant and card holder to protect themselves then keep their eyes open for red flags.

• Beware of calls from your bank saying that they are verifying possible fraud on your account. Often scammers will ask you to verify the three digits on the back of your card. Your bank already has that information and does not need you to verify it.
• Make sure when you make purchases online that you are on a secure environment, and you are making your purchase from a reputable company.
• Don’t Fax or email your credit card number to anyone.

We can’t detect all fraud, all the time, but we can make leaps in the right direction so we can begin making it harder for fraud to occur.