Banking Review

Is hardware the future of mobile payments?

One of the less talked about features missing from the controversial iPhone 4, which was allegedly stolen from a bar and sold to a journalist in April, is the contactless capability many bankers have been waiting on.

An examination of the photos of the iPhone 4 and its components finds no evidence of an NFC chip within the phone, so it looks like we might have to wait for a later release to see the device enabled to work with contactless readers.

In the mean time, Visa has bypassed Apple and teamed up with plug-and-play technology company DeviceFidelity to launch a protective case and microSD card that allows the iPhone to work with Visa’s PayWave contactless devices.

DeviceFidelity says the In2Pay microSD can be issued and personalised like traditional smart cards or, in the future, through a secure download of the account information via a mobile network.

At the same time, other companies including card producer Giesecke & Devrient, CPI Card Group (whose product has been endorsed by MasterCard), and start-up Bling Nation are promoting stickers as the answer to mobile contactless, since they can be attached to any mobile device. Bling Nation’s coin-sized microchip sticker or “BlingTag” adheres to the mobile phone, enabling secure debit transactions and delivering an SMS with real-time account balance information as part of the purchase verification process. Bling Nation has signed a number of US based community banks to its service.

In Australia the Commonwealth Bank leads in the deployment of contactless cards and terminals, with more than 3 million cards issued and a target of 15,000 terminals in the market by the end of the year. But it’s a far cry from the number of terminals required to make contactless mainstream, and Australia is still missing a unified and open contactless solution for public transport that could work with bank issued cards or chips.

Which makes interim solutions for mobile payments such as the In2Pay much less attractive.

Another interim payments solution relying heavily on hardware is being driven by start-up Square. Square has combined an iPhone and Android application with a small cube-like device that plugs into the iPhone’s audio input jack and allows anyone to accept credit card payments using their phone.

ANZ’s ePOS Mobile solution, announced in April, doesn’t require the hardware, but does require a merchant agreement with the bank, something Square helps bypass.

Ultimately the true test of the hardware solutions on offer is whether consumers are willing to accept the inconvenience of a hardware device for the benefit of easier payments. Many may simply choose to wait for phones that deliver the improved capability in one device.  What do you think?