Credit Card Processing: Paying with Your Mobile Phone

By Jennifer Hicks
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Make no mistake: mobile commerce is coming, which means you'll soon be able to use your mobile phone as an electronic wallet with credit card payment options. The technology behind mobile payments is called near-field communications, and it's similar to the technology found in easy-pass toll machines on interstate highways. Some Asian countries have been using mobile payments for limited applications, such as public transportation, but it's primed to become an everyday part of life in the United States.

What's involved with mobile phone credit card processing? First, you need a phone equipped with near-field communications technology, such as the Nexus S made by Samsung and launched in 2010 by Google. By downloading a payment app, you can turn this phone into a mobile payment processor. Two other companies, Nokia and RIM, the maker of BlackBerry, are developing phones equipped with near-field communications.

Meanwhile, phone companies are getting on board and developing mobile payment networks. Some are partnering directly with banks. This is a necessary and important step in the development of mobile phone credit card processing, which is already complex. When you use a plastic credit card for any type of purchase, several entities are involved: the bank that issued your card, the card network (think MasterCard, Visa and so forth) and the merchant's bank, where the funds from your purchase are deposited, minus fees. Mobile phone credit card processing adds another layer of complexity by bringing phone networks into the mix.

With this in mind, everyone is working toward the safety and security of transactions. Already there are rules in place that require a consumer to key in a code at a point of sale similar to the codes used for debit-card processing. Phone makers and near-field communication software providers also are focused on encryption to provide the highest degree of security when information is processed.

While many of these technologies are still in the pipeline, some companies are aggressively moving forward with options that enable mobile phone credit card processing now. For example, Google has a new electronic wallet app that allows Android users to pay by waving their phones at the register.

Of course, PayPal already has mobile phone credit card payment systems for iPhone, BlackBerry and Android devices. These systems enable your phone to send money to others, track transactions and physically bump your phone to another to exchange contact and payment information – provided both you and the owner of the other phone have PayPal accounts. PayPal has extended its security to these mobile operations, requiring a PIN or password to make any payments. This means that no one can use your phone to make payments if it is lost or stolen.

Other options currently available include a Starbucks Card Mobile app. Launched in 2011, the free app is essentially a digital replica of your prepaid rewards card, and the app lets you link to either a credit card or PayPal account, so you're still paying with your virtual Starbucks card account, but you're using your mobile device at the register.

With near-field communications technology developing quickly, expect to see more mobile phone credit card processing apps and options in the near future.

 
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