Empty wallet is no problem in this electronic age

Fed up fumbling with cash for fripperies? Then get ready for speedy transactions helped by contactless debit cards and mobile phones that act like credit and debit cards, writes CAROLINE MADDEN

THE WAY people used their money was revolutionised with the creation of the Diner’s Club card in the 1950s. Payments technology has moved on slowly since then but a stream of breakthroughs and deals are being announced in the area now, according to Lewis Nolan, a vice-president at Visa Europe. Last month, mobile payments giant Square, launched by Twitter co-founder Jack Dorsey, was valued at $1 billion.

It is not certain exactly which new technology will emerge as the outright winner, Nolan says. “It’s a little like the dotcom bubble of 1999-2000,” he says. “There’s a lot of technology and capability being developed, but what will be offered to customers, and what they will like to use, is uncertain.”

A number of technological developments are already on the way for Ireland. By next summer, for example, it’s likely that contactless debit cards will be common.

With those cards, you will be able to pay for your triple-espresso in less than a second simply by holding it against a reader in the coffee shop. It will be enough simply to tap and go.

Visa introduced a contactless card in London in 2007, and a few thousand local merchants, mainly coffee and sandwich chains such as Pret a Manger, signed up for it.

Things took a leap forward when Barclays said that it would be adding contactless capability to all of its new cards. One of the first major retailers to sign up was Boots. The retail side took off last May, when McDonalds went live with contactless capabilities in all of its 1,200 outlets in the UK. It is estimated that more than 60,000 shops in the UK have contactless readers now.

“It’s really starting to mature well in the UK,” Nolan says. There are about 15 million cards in use there.

So when can you get your hands on one here? Bank of Ireland will start to offer contactless Visa debit cards later this year. The card will allow you to spend up to €15 at one time.

Following hot on the heels of Bank of Ireland is Ulster Bank, which enlisted some of its staff to try a contactless card in the staff canteen in Dublin last year. The bank says it is now “actively progressing plans” to roll out the cards to its customers next year.

It is possible for someone who has stolen your contactless debit card to go on a spending spree, but it would probably be short-lived and pretty unrewarding. One of the security features of the card is that, once it’s been used more than a certain number of times or to a certain value, you have to enter a Pin to complete the transaction. Nolan says that the low-value limit means Visa has not had a problem with fraud in the UK. Professional criminals aren’t interested.

Of course there’s no point having a high-tech card in your wallet if no one will accept it. Nolan says work is progressing to ensure that when the cards hit the market, consumers will be able to use them. Visa is focusing on retailers that have businesses in the UK and Ireland that have common systems, but also intends to get national retailers on board.

How would you like it if your contactless card was incorporated into your smartphone? No problem. Visa has linked up with Samsung to develop a handset that will allow you to pay for items by simply holding the phone in front of a reader, using a hot new technology called near-field communications (NFC). The handset will be on the shelves in time for the London Olympics next summer.

Nolan says the new generation of payment terminals being sent out to retailers and merchants in Ireland are future-proofed for a while as they have NFC.

The next technological advancement that could become a reality in the coming years is person-to-person mobile payments.

Say you are out to dinner and your friend settles the bill. You want to pay your share but you realise you have no cash on you. You will be able to pay your friend the money you owe them through your smartphone. The technology is at a nascent stage at the moment, but experts say it’s definitely on the horizon.

Don Callahan, who is responsible for innovation at financial services giant Citi, says he sees the three concepts of the smartphone, the credit card and the ATM coming together.

Once the security technology is in place to verify the identify of a smartphone user (and Callahan believes this will be done using biometrics of one form or another), then the consumer will be able to interact with ATMs by simply placing the handset on the machine. In time, ATMs will incorporate video technology and will probably talk to you, he says. Citi is testing out such systems in Singapore and Japan now.

Citi has teamed up with a number of technology companies that are focused on biometrics, and he says voice-authentication technology, iris scanning and even ear-canal recognition is getting better and better.

Una Dillon of the Irish Payment Services Organisation (Ipso) sounds a note of caution about biometrics. While it seems like a great way to prevent ATM fraud, if you are trying to get cash out late at night, would you be comfortable with putting your eye up against a scanner?

When banks in South Africa introduced fingerprint readers, a disturbing urban legend began doing the rounds that criminals were chopping off fingers to get money out at ATMs. Whether this actually happened or not, ATM biometrics have now moved on, with the newer versions using finger-vein scanning, which means that the individual must have a pulse in order to get money out.

Biometrics aside, the era of the digital wallet – a term that refers to NFC-enabled smartphones that allow you to make mobile payments – is almost upon us. “It’s not a question of whether it takes off, it’s how it takes off,” says Callahan.

Citi was Google’s lead banking partner in the development of its new Google Wallet app, a mobile payment system that is being tested in five markets.

Last month, however, Citi’s security was breached and hackers gained access to the credit data of some of its North American card holders. This has raised the question of how Google intends to keep such data secure once the digital wallet is launched.

Until such questions are answered to the satisfaction of consumers who are increasingly conscious of the security of their personal information, the Google Wallet could be a tough sell.

So what else is on the horizon? John Clarke of Dún Laoghaire-based technology company WorldNet says the whole area of mobile payments is very new and what’s possible is being teased out at the moment.

Retailers are looking at whether to make their websites mobile-compatible, or to develop an app, to allow people to buy their products using their smartphones.

Currently if you want to buy something through an iPhone app, it is likely to be powered by Apple’s one-click payment system, developed by Amazon and licensed to Apple. The only problem with this is that Apple pockets 30 per cent of revenue.

As a result, the only goods that it makes sense to sell through iPhone apps at the moment are low-value digital items with a very high margin, such as ringtones.

You can’t buy airline tickets, for example, because no airline is going to give 30 per cent of revenue to Apple. However this could all change quite quickly.

WorldNet, for example, has developed a number of apps that would mean that the retailers in question would only have to pay the same 2 to 3 per cent cut that they currently pay through their e-commerce payment systems, rather than 30 per cent. (Those WorldNet apps are currently with Apple for approval.) This would effectively mean that retailers could sell any product currently available on their websites, through mobile apps.

Dillon says cash will never be phased out completely however, though cheques will.

She views the introduction of contactless payments as a big priority. “From our perspective contactless would be up there with the top three moves to bring payments [in Ireland] into the modern age,” she says.