Will Smartphones Replace Your Credit Cards?

A BlackBerry smartphone

Updated January 31, 2011

One of the hottest trends in technology right now, at least in the US (although it has been ongoing in Europe, and some Asian countries such as Japan, South Korea) is the adoption of NFC-enabled chips into smartphones and mobile phones to act as your contactless mobile payment or contactless credit card.

Some of you may have heard rumors about Apple is contemplating to adopting the technology with its latest version of iPhone or iPad by developing the software side that runs NFC which enables these devices as a mobile wallet. Once enabled, your phone can be used at POS as opposed to making online credit payments.

Some even have predicted that NFC payments may surpass contactless cards in 5 years.

An iPhone being used in payment transaction.

NFC, or Near Field Communication is a short range high frequency wireless communication technology which enables the exchange of data between devices between 4 to 10 centimeters in distance. It is an extension of the ISO/IEC 14443 proximity-card standard which runs using radio frequency. An NFC-compliant mobile phone/smartphone can emulate or behave like a contactless card which can communicate to a standard ISO/IEC 14443 smart card reader. In short, you wave your mobile phone/smartphone close to a contactless reader at checkout to pay for your coffee, or shopping items just like how you wave your contactless credit card.

If you can wave your mobile phone to an NFC-enabled card reader then your device is NFC enabled. In the US, there are only few smartphones or mobile phones that do that. Some newer models of Blackberry is NFC-compliant. Newer iPhone models and the Nokia C7 have built-in NFC chips but are not enabled yet. Windows Mobile and the Android based smarphones/mobile phones do not support NFC at this moment.

But here's my take: One of the greatest drawbacks about using your smartphone as medium for payment transaction is the security of your personal information. Recently, the current RF-enabled swipeless credit has been demonstrated hundred of times how easily to skim or hack the information from these credit cards via cheap card readers. Because technology is neutral and it can be utilized by both the criminal and the innocent, no one can ascertain the extent of benefits or harm it can bring.

This Nokia C7-00 is an NFC compliant mobile phone. This and other mobile phones can be available at Amazon
and some retail stores in the US. Image from Nokia.

When your standard credit card is stolen, you can always report immediately to your card issuer and disable it immediately, then request for a replacement. You can always "regain" your previous credit status back at that instant. Besides, credit card replacement is free or at least with few dollars only. But how about an NFC-enabled mobile phone or smartphone (like the picture above), when it is stolen, how much information can be lost?

A loaded smartphone can have tons of information such as but not limited to, your important emails, saved voicemails, your online purchase transactions, your personal data, possibly your bank information, your personal or business activities, important people from your phonebook. Your personal and family pictures that you cherished. Or even your intimate videos with your significant other that you happened to record are also there.

Virtually your life and your identity ARE at risk and even becomes irreparable after it is gone. Therefore the question that must be addressed will be: Are you willing or are you ready to risk these much information in the name of convenience to be used and abused by other people once your smartphone is gone or stolen? Would you?

No doubt, NFC-enabled smartphones are smart alternatives to credit payments and therefore they create more options for shoppers like you and me. But it won't replace the latter even in the next 15 or 20 years. Contactless credit cards will evolve to more sophisticated smartcards but they won't be replaced by mobile phones. I am not saying it is impossible. They are theoretically possible. All I am saying is that it is unlikely to happen. 

There is no question that NFC-enabled smartphones can simplify your life. Their ease of use and the convenience they bring are functionally and economically irresistible. But convenience, or ease of use has always a price to pay. And that price could be the very life you have.