Over the past few years, cellphones have metamorphosed from a useful communication tool to the equivalent of a Swiss Army knife. Soon, the only thing you will have to have in your pocket when you leave home will be your cellphone.
Today, a cellphone can be used to pick up e-mails, take photographs and videos, listen to music and pay accounts.
At a recent Bryan Adams concert, the singer called on people to pull out their cellphones to use as lighters when swaying to their favourite song. In Asia they are already replacing bank cards with embedded chips coming standard in new phones.
In Russia, Japan, South Korea and Taiwan, people are now sporting chip-enabled phones that they simply wave past a reader to pay for goods and services. In Taiwan and Korea, in particular, all new phones will carry a chip embedded in the handset.
While South African banks are rolling out chip-enabled smart cards over the next 12 months, global technology has already jumped one step ahead to what is termed “contactless”.
Both Visa and Mastercard have introduced contactless payment systems that do not require you to swipe or insert a card in a reader. This speeds up transaction time, especially for services that are timesensitive. In the United States, low value transactions such as McDonalds and movie theatres can be paid for by simply waving your wallet in front of a scanner. For higher-level transactions, one is required to enter a personal identification number (PIN), but the contactless card or phone is already replacing everyday cash transactions.
The transport systems in Taiwan, South Korea and Russia have implemented contactless payments. By simply waving the chip past a reader, the payment process is speeded up, which is vital for a transport network. Visa, the payment systems company, is looking to roll out a new application that will allow a chip-enabled credit or debit card to be used on different transport systems throughout the world. For example, if you are traveling to Moscow via London, you will be able to download the London Underground application to your chip using the latest chip technology called GlobalPlatform.
Once you reach Moscow, you can then download the Moscow Metro application on to your card and travel around the city by simply waving your card in front of a reader. On returning to London, you are able to continue to use your London application, which will remain valid until your card is renewed by your bank.
Visa is in talks with South African authorities to include the Gautrain on this platform, although the outcome will depend on South African banks, which will have to upgrade their chip-enabled cards to carry the relevant technology, and it depends on the Gautrain materialising.
The idea of not needing cash when paying for parking or buying a burger may sound good, but what about the security risks? What if you are merrily walking past McDonald’s and the scanner picks up your card and deducts money or someone with a reader strolls around shopping centres trying to scan off your card?
Nick Essame, head of new technology for Visa’s sub-Saharan Africa division, says it is unlikely that accidental scanning of cards will take place as the protocols are set up so that chips cannot be read from more than 10cm from readers.
“You actually have to tap or wave the chip very close [to the reader] for it to be read.” As for fraud syndicates wandering around shopping centres with scanners, Essame says the technology required to crack the encrypted data from the card makes it virtually impossible for someone to create the scanner, and at the same time, transaction levels without PINs would be too low to make it viable for a syndicate to invest the time, effort and capital.
While these technologies are already in full force in other areas of the globe, South Africans should expect to see contactless applications coming on to the market in the next few years.
Standard Bank is piloting Mastercard’s Paypass contactless application so it may not be long before you will be requesting a chip-embedded cellphone to replace your wallet.