Is Pay By Phone the Next Big Thing?

If you’ve noticed offers at your gas station or grocery store to “pay with your phone,” you’ve seen what many claim is the future of how we’ll pay for goods and services: Near Field Communication, or NFC.  Whether you relish the idea of ditching your wallet in favor of swiping your phone everywhere you go or you shudder at the thought of losing a phone laden with all your credit card info, NFC is likely to gain in popularity in years to come.

Bluetooth and Wi-Fi are familiar forms of electronic communications that allow devices to transfer information back and forth.  They operate on radio transmissions and are designed to accommodate distance between devices.  Near Field Communication, on the other hand, utilizes electromagnetic radio fields which require the communication partners to be in close proximity – typically less than 4 inches apart.

The advantages of NFC technology over Bluetooth and Wi-Fi is that it requires less power (resulting in improved battery life of your device) and the necessary close proximity reduces the likelihood of signal interference.  While Bluetooth requires that devices be paired, NFC connects automatically in mere seconds when devices are in range of each other.

Proponents point out the multitude of benefits beyond just a way to pay without pulling out your credit card.  If you’ve seen the commercials for the Samsung Galaxy S III where data is transferred from one phone to the other by tapping them together, you’ve witnessed integrated NFC in action.  Syncing data with other devices or transferring files is quicker and easier using NFC than via Wi-Fi or Bluetooth.

While many focus on the “mobile wallet” aspect of the technology (i.e., using your phone in place of a credit card to pay for goods or services), it can also be used to store public transportation passes and/or concert tickets, loyalty cards, even allow you to ditch key cards in favor of swiping your phone to access your office building, hotel room or parking lot.

The ease of using your phone for everything you previously had to dig out a plastic card for is appealing; however many are concerned about the security risks of having all this stored on such an easy-to-lose gadget.  I certainly envision someone snatching my phone for an afternoon shopping spree before I notice it missing.  Yet in truth, with how often I use my smartphone throughout the day, I’d be more likely to notice my phone missing than one of my credit cards.

Is it wise to consolidate access to every aspect of your life (bank accounts and credit cards, data, access to your home, car or office, etc) on your phone?  Proponents argue that it’s more secure than losing your wallet or purse due to the quick and easy ability to disable the device remotely (which is certainly faster than calling all your credit card companies if you lose your wallet).  NFC often establishes a secure channel and utilizes encryption when sending sensitive data like credit card numbers.  In conjunction with the required close proximity, there’s little risk that your data could be hacked by a passerby.

Should you get started with a service like Google Wallet (www.google.com/wallet) to store credit cards, loyalty cards and special offers on your mobile devices?  Maybe.  I like the idea of never again having to dig out my PetSmart card to get money off dog food, but to be truly useful more retailers need to upgrade their equipment to support NFC.  This means I’d have to carry phone and wallet to accommodate a day of errands.  However, if enough of the merchants you frequent support it, it may be worth looking into – provided you implement the mobile device security measures I highlighted last week.

About The Author: Andrea Eldridge is CEO and co-founder of Nerds On Call, an on-site computer and laptop repair service for consumers and businesses.

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