In the Blink of an Eye, You've Paid
M.P. Dunleavey reports for the New York Times on new payment technologies including contactless and biometric payments.
Forget standing in line, swiping your card at the cash register, waiting tedious seconds for your purchase to be approved and then signing the receipt, while people behind you make restless rustling noises. Who has time for all that?These technologies allow you to flash a card in front of a scanner, or touch a fingertip to a screen - and without so much as a ka-ching, the item is bought, your account is charged and you're outta there. Often without even a receipt.
Quote from article: "One new card, from Chase Bank U.S.A., is actually called Blink — raises financial red flags for me."
I would have to agree. These so-called "blink" or "contactless" cards say it all. In most cases, using these cards does not even require a signature. That's how they "speed up the transaction"
So who does the bank "contact" if these "contactless" cards are used fraudulently? It seems to me that they will INCREASE fraudulent activity.
If you don't have to sign or "verify" the transation, then how do they know it's you making the transaction?
In addition, one can lose their "blink" card (or have it stolen) and ANYONE...yes ANYONE can use it.
On the other hand, I love the idea of Pay by Touch. I understand it uses a series of 40 algorithms to identify you during the "scan" (not the actual fingerprint) AND you need a PIN.
I saw a recent study that said a "Signature debit" transaction is 15 times MORE likely to be fraudulent than "PIN debit".
(http://www.cardweb.com/cardtrak/news/2005/october/13a.html)
A logical person would come to the conclusion that a "biometric signature" combined with a PIN would be immensely more secure than a contactless, signatureless, PINless, contactless transaction. Yet Visa and MasterCard charge the higher "card not present" rate (higher because of higher fraud risk) to PBT merchants....Which, frankly, is...well...illogical. (as well as ill-advised, considering the pragmatic ramifications of this potentially anti-trustworty act.)
My money is on Pay by Touch. More secure, just as fast, can't forget it at home, and for those who will argue that I can lose my finger or have it stolen, then you're not aware of the fact that biometric sensors "sense" both pulse and warmth.
For privacy advocates, I'd argue that a check has your account number written on it (why not just write down your account number on 1000 pieces of paper and keep handing it out to people you don't know...(i.e. the 18 year old cashiers making minimum wage) until someone is tempted enough to commit fraud?
Cards have numbers which a digital cell phone can "snap" a shot of in the "blink" of an eye.
Although nothing is 100% fool-proof, what are the chances of reverse-engineering 40 data points to come up with a correct algorithm AND knowing the PIN number?
Pay by Touch partners, IBM, NCR, Accenture and Discover have "fingered" biometrics as the "wave" of the future. So don't be "waving" cards I say as I wave my finger in warning.
Oh, did I mention that merchants pay the same Interchange Rate on blink/contactless cards as they do on magnetic strip cards? So what's the benefit to merhants again? A faster checkout? With increased risk? At the same rates? Hmmm.
You undoubtedly have seen all the retailer lawsuits against Visa and MasterCard based on their Interchange Rate.
The potential liability from these merchant lawsuits are impelling MasterCard to IPO (in order to raise enough money to pay the settlements...) Will the SEC makes potential investors aware of this.
Pay by Touch transactions cost merchants up to 70% LESS than Interchange by utilizing the ACH network for debit tranactions. Who needs Visa/MasterCard for debit anyway? Aren't they "credit card" companies?
So take the money you would've given to MasterCard's IPO and save it for Pay by Touch's. They're more likely to earn you a return whereas MasterCard will use the money raised from their IPO to pay fines and attorneys.
JBF
Posted by: JBF | December 19, 2005 at 08:32 AM
I wonder about all these new forms of payment. In the case of Contactless what happens when the transaction value exceeds the limit set for no signature transactions. How do I handle the ergonomics. I hold my card with the right hand and sign or enter my PIN with my right. hand too What do I do with the card, pull out my wallet put it away then sign. There went the value proposition - speed.
As for Biometrics. As a means of Verification it makes good sense. But if it is to become a means of Identification how does it scale to 100s of millions of consumers? Will we still need something that carries our means of Identification a card.
Then there is the question of Global interoperability. The rest of the world is going EMV based on Contact Cards. Will Americans accept that they cannot use their plastic overseas or in Canada? Why you ask - the magnetic stripe will be around for a longtime? The Clerk I respond. They will forget how to swipe cards in a few years or will think that it is unsafe to do that. Everyone elses Cards have Chips on them these must be unsafe.
Posted by: Philip | December 19, 2005 at 08:39 AM