Monday Mar 03, 2014

Two Really Cool Approaches to Payment

As if the oodles of emerging payment schemes weren't enough, two more approaches have arrived on scene.  Aside from enabling your phone to make payments, they are very unique and well worth some consideration.  The first solution is called LoopPay, and its creators claim it works on 90% of existing payment terminals without any new hardware.  Install the wallet on your phone and plug-in either the fob or charge case, then tap on any existing payment terminal to pay using your credit or debit card.  Now think about that.  How's it done?

No, they're not using NFC or bluetooth to communicate with the terminal.  That would involve additional or updated hardware, and I said this works with existing terminals.  Are they using sound like ShopKick?  Nope.  QRcodes?  Good guess, but no.  Think about it from the terminal's perspective.  The only way to enter card data is the keyboard or the magstripe.  Wait for it.  Yes, the phone via the fob emits a magnetic field that contains the track data.  Its pushing the track data into the magstripe head of the terminal.  From the terminal's perspective, we have a traditional, card-present transaction.

Here's the rub: like I said, it only works on 90% of the terminals, and in real-world tests maybe even less.  Its a tough sell for banks and retailers to say "works most of the time" to their customers.  Obviously there are security concerns as well, but I'm assuming they are able to vary the track data just as EMV would, so its at least as secure...maybe.  But then again, I'm still not convinced that tapping my phone is any more efficient than swiping inserting my card.

The second approach is a bit more traditional.  If you'll recall, Google Wallet only worked on certain phones when it was first released.  iPhones were out because they don't support NFC, and only select carriers were supported with Android.  That's because the wallet made use of the secure element, a place were crypto algorithms are run and data can be secured.  The secure element can be built into the phone, but most of the time its in the SIM chip that's owned by the telcos.  And as Google found out, if the telcos don't allow access to the secure element, you can't do NFC payment.

That's where SimplyTapp enters the scene.  They're advancing Host Card Emulation (HCE), a method by which you can do NFC payments using a secure element that resides in the cloud instead of the phone.  Android has included HCE in their latest version, KitKat, so now all NFC-capable phones are ready for NFC payments.  The big news here is that banks are now free to create payment schemes without getting approval from the telcos.  Both MasterCard and Visa recently endorsed HCE so I'd expect existing banking applications to begin adding the ability to pay soon.

So where does that leave us?  The telcos continue to want a piece of mobile payments via Isis; Google gets access to more handsets; banks are well positioned to support their own mobile payments; MCX continues to focus on reducing merchant fees; and Apple is the wildcard.

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David Dorf, Sr Director Technology Strategy for Oracle Retail, shares news and ideas about the retail industry with a focus on innovation and emerging technologies.


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