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Saturday, August 17, 2013

Apps and phones: The future of payment

Cash and card payments will be overshadowed by smartphone payments per Pew research
Mobile banking is convenient
By Greg Jones

How we acquire services and items matters a great deal. From bartering, to money, to credit cards, we have evolved our methods to gain the things we want. However, what is the future of payment and what security could be taken for such extravagant future technologies?

The ability to acquire items or services arises from recognising we are not capable of doing or making everything, as individuals.

Our skills as a carpenter might take years to acquire, but it also means we don’t get the skills of a surgeon. Yet the surgeon might need a table and the carpenter might need surgery. However, things are not equal: If a surgeon needs a table, he can’t offer his only – albeit highly technical – skill to a healthy carpenter! Money is a means to stretch that exchange, allowing it to occur instead of the sometimes unequal bartering. But what do we mean by money?

Money talk

We might automatically think cash and coins. But that’s of course limited: After all, we now have credit and debit and accounts. Indeed, most people in some countries, like Britain, are slowly moving toward electronic payment: In 2010, £272 billion was spent on debit cards compared to £269 billion in cash. That’s a difference of about £10 billion.

Now consider the future of payment technology, such as Google Wallet. Used on Android phones, the free app works similar to PayPal, in that money can be put into and drawn out from bank accounts. The idea is that we give wallets entirely and just carry out smartphones. When we get to a counter, we simply “tap of your phone at the register”. Other devices are of course doing the same thing. Indeed, Pew Research concluded that, by 2020, smartphones will replace cash and cards as the preferred payment method.

The convenience of having all necessary items within a singular item is obvious. There is no need to worry about where your wallet is, where you cash is, whether you’ve drawn enough and so on – all of it is sorted by having the right phone.

And mobile banking is not only becoming increasingly popular, but increasingly sophisticated. For example, on advanced but easy-to-use apps like First National Bank’s (FNB) app, one can manage all manner of things: debit payments, invoicing, transfers and switching between accounts (though not necessarily more advanced transactions like debit order switching). The logical step then is to make mobile banking as credit card: that is, “swiping” at the till. Or, in a phone’s case, tapping the screen. There are various methods, but one often cited is NFC, or near-field communication. This is an ultra short-range wireless technology allowing communication and data exchange between two devices held in close proximity.

Security matters

Of course, if we reach the stage of using smartphones for in-store payment, we must recognise that convenience isn’t the only determining factor. It’s security, too. For example, what can we do if we lose our phones? It would, in a sense, be the same as losing our wallet. Second, unlike cash, you can be hacked or broken into and have money stolen. Safe cash untouched can’t be “magically” taken by smart people kilometres away, without leaving their office.

Of course, we don’t simply leave it as such: We take precautions. For example, if your phone is stolen, we’ve all got ways, like loved ones, to help us cancel the phone’s activities. We can immediately notify our banks that any activity from specific places should be denied – just as we do with stolen cards.

The point is that we don’t cease progress simply because they’re problems. We have problems even with current technology. By definition, the monetary system is by definition an illusion, as Professor Susan Crawford from Harvard says. But we don’t let its illusory status define the security: we still do what we can to be efficient and safe.

The future is not scary but convenient and we should allow our spending to follow suit.

About the author: I am Greg Jones, a self-employed guy who loves cookings, outdoors activities and spending time with my family and friends. As a business person, I find using my smart phone to do transactions saves me time and effort, allowing me to focus on the important things in life - fitness, family and friends.

Image license: Jpcritis; RGBStock royalty free