Editorial

Do we really want NFC payments?

I guess it all started with currency.

It used to be that stuff had value, and if you wanted something that wasn’t yours, you’d have to give up some of you own stuff that had value for that other stuff you wanted that also had value. This made sense to people, and primitive economies were born. Currency formed a level of transaction standardization where people could assume the market value of a set weight of metal or other medium would be honored. Currency was convenient. You could keep it on your person, and carrying around some gold nuggets was a vastly superior way to pay for food than carrying around your prized cattle to trade with; it was so convenient that people started parting from their money faster, and economics liked that. Fast forward one or two thousand years, and currency is no longer the gold standard (see what I did there?) of goods transactions. A few companies started using magnetic strips on plastic cards to represent a guarantee of funds to a merchant. Add the proliferation of consumer credit to the equation, and people are suddenly spending nonexistent (in a physical sense) money and receiving valuable goods. This caused a huge boost in spending, and a huge boost in personal debt, and it showed many people what the consequences of irresponsible spending are.

Image Source: MyBudget360

Credit cards are considered by many to be a failed social experiment. It showed that people, when faced with an abstract notion of value, won’t valuate it like actual value. The convenience of the swipe and the reality of the goods received are too much for many to handle, and people are drowning in debt. This certainly isn’t the case for everybody, and credit card debt has generally been in decline since the economic disasters of 2008, but the effects and ripple effects of large public debt are felt by all.

With the entire idea of credit cards and credit still under scrutiny by regulating bodies around the world, the technology industry is ready to start rolling out NFC technology to process payments. Near Field Technology is form of short-range wireless communication that is very fast to connect and is resistant to interference, making it a great candidate for short wireless communication in crowded areas. It is slower than Bluetooth as far as data transfer rates go, but it can pair two devices in a tenth of a second. It also serves as an improved RFID scanner, as it can scan inactive sources of simple information like tags or stickers as well as peer-to-peer communication, which requires both sides to be actively transmitting. There are many smartphones that include NFC functionality, including the Samsung Galaxy Ii and the Nexus S.

While there are many potential uses for NFC, payments from your phone has proven to be one of the most anticipated uses. It moves the world one step closer to a place where a wallet is superfluous, as all of your payment and identification data can be stored on one device that can communicate wirelessly with point of sale systems.

The technology, while increasingly available in phones, is still stagnant on the retail end of things. In a ZDNet interview, PayPal’s director of mobile, Laura Chambers, says that there is a general lack of confidence in amongst retailers in such a new technology. This is also the reason, according to Chambers, that Apple is rumored to have decided to leave NFC out of the next iteration of the iPhone. Apple’s reluctance to support the technology is going to be a huge factor in its proliferation simply because of the sheer numbers of iPhones in consumers’ hands. Even if Google, Samsung, HTC, Motorola, and Sony all got behind the electronic payment companies and pushed NFC to market, Apple’s indifference to it would still be an ultimately deciding factor for retailers.

However, the question is not a matter of if, but of when. NFC promises a method of getting consumers to part with their money faster and easier than ever before. It doesn’t take a brain surgeon (or a rocket scientist) to see that the credit card companies hit a veritable gold mine with their innovations in the science of getting people to spend more money. Credit cards, however, are still a physical device. Once the ability to spend money in a store becomes a fully digital transaction, simply another wireless function of your smartphone, people will spend the money they may or may not have faster than ever before. Apple may not be getting behind the NFC parade for the iPhone 5, but that could very well just be a response to general lack of interest among retailers, and that disinterest is most assuredly temporary.

While the idea of wireless short range payments from your phone is tantalizing to some, it’s downright scary for those watching the effects of years of credit debt taking its toll on global economies. While the technology is great, and it offers so much more potential than just a wireless payment system, do we really need an easier way to spend money? I hate to sound old, but this time I think that the old ways may have been better for us as an acquisitive society. When money was “real” and physical, we were less prone to overspending it and debt was something that you incurred only when you absolutely had to.

Nevertheless, there is hope. There is a clear advantage to moving payment systems to smartphones, and it is the one feature that no credit card can offer. Smartphones can communicate with you as well. If you spend money with it, it can show you the effect of your spending on your bank accounts, in real time. It can track spending trends as you form them. It can tell you that you’ve spent $75 at Starbucks this week when you’ve bought your 10th caramel macchiato on Tuesday. It can show you, and it may actually make you think twice. You see, NFC doesn’t have to be only the most convenient way to spend money. It can also make us smarter spenders. It can tell you. “That pair of shoes will put your checking account at dangerously low levels. If you buy these shoes, you won’t be able to pay your mortgage this month. Are you sure you want to continue with this purchase?”

NFC payments are a scary prospect, and our general performance in the credit card business has shown that we aren’t always the most responsible spenders. However, it doesn’t have to be this way. With some solid regulation and some innovative implementations of mobile payment platforms, NFC could actually help us spend smarter, not easier.

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44 Comments

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Do they require more than a signature? That I one thing I hate about credit cards...Not even a PIN, all it needs is a signature, that most cashiers don't even look it...
And I like dealing with cash...I don't even use debt much lol

ncc50446 said,
Do they require more than a signature? That I one thing I hate about credit cards...Not even a PIN, all it needs is a signature, that most cashiers don't even look it...
And I like dealing with cash...I don't even use debt much lol

In the UK all cards require a pin, and with NFC cards you can get randomly asked for your pin.

Personally, I find it far easier to overspend with cash.

Why are people's constructive comments (including mine) constantly getting deleted? I see other comments on here that are equivalent to mine and even worse. What happend to freedom of speech?

I simply wrote No and that even thought we don't need nor want it, all phone manufacturers will probably do it anyway because of this "everyone else is doing it" way of doing business.

j2006 said,
Why are people's constructive comments (including mine) constantly getting deleted? I see other comments on here that are equivalent to mine and even worse. What happend to freedom of speech?

I simply wrote No and that even thought we don't need nor want it, all phone manufacturers will probably do it anyway because of this "everyone else is doing it" way of doing business.

I dont think they are getting deleted, its happened to me a LOT lately on neowin, comments just disappear, and stangely when I say they where gone they pop back up to make me look like an idiot or something....

People can't understand change. If you don't like it don't use it. I believe most people that worry about privacy are doing something wrong to begin with. We already use this technology in our credit cards. RFID in my debt card is the same thing. If you lose your phone people can't access it without a password and you can remotely wipe it anyway. If you lose your credit card people can start using it right away.

Personally I would like to see money removed completely and everything require another way of payment. I hardly carry cash these days anyway.

Why does the entire thing act like debit cards don't exist? Giving credit (in whichever form, credit cards included), to people without enough guarantee, is always a mistake, and this has nothing to do with NFC, magnetic strips, or whatever.
Sure, you lose the impression that you are running out of something (like when you spend cash), even if it's debit. But come on...

I myself am tired of having to take out the card, or even sign. I dont mind the PIN method though.

Honestly this author should really stop writing "editorials".

Pick up a finance book and learn why credit cards have entered the mainstream, permeated our society, and been difficult to get rid of. It's not a failed "social experiement", it's a bullying by retailers, corporations, and government to get us down this road. The Dodd finance reform bill (which is a sham, but I digress) has shown the amount of scam and illegality of credit cards. They started off like cable TV, where the idea was "get Cable, and you won't have commercials!" -- pushing a false promise on an unsuspecting audience.

Now credit cards are safer to spend money with, but the consumer laws have been stricken so that you can't declare bankruptcy as easily (thanks Credit Card companies!), you didn't know how many payments you'd have to make to complete your balance, and your interest rate was changable at any time.

Having an easier way to spend money is not the point. And NFC payments are simply an evolution of existing technology, and will eventually be adopted as well. You don't sound old, you sound like a fearmongerer -- just like every article you write.

While I've sat on the sidelines and watched these articles be posted for a while now, it's come to the point where people don't need to tune into Neowin to hear about "the next great scare" like FOX news does about terrorism. It's crude and pathetic journalism at best, and if this is the way Neowin wants to get its clicks -- feel free. ArsTechnica still writes thoughtful articles.

WOW, what's with all of you people? This is no more risky than carrying your credit card in your wallet. In fact, it may be less risky. Say you want to pay for an item, you load up the credit card app and enter your PIN, then wave your phone. This is MORE secure than lots of credit cards. At the gas station all I need to do is put my credit card in. No other authorization necessary.

The phone will not be constantly broadcasting your credit card credentials. Someone can't just wave their phone by your pocket and steal your card.

What if someone steals your phone? Well they still need your PIN. And they could have stolen your wallet, too.

I'm excited for this and can't wait for it to become standard.

YES! - Already use my card where ever possible.
Don't really buy this 'invasion of privacy' talk.....Although I'd still rather have it in my debit card, than on a mobile phone.

Not much of an issue for me. Already have and use NFC in my credit card and I pay my phone bill with my CC so not much will change.

No we don't NEED it nor do I want it... BUT of course every phone maker will include it because of the "everyone else" is doing it mentality.

Boeing 787 said,
How many people are gonna get ripped off with NFC ?

I don't think anyone will get "ripped off". I think if people link it to an actual credit card they won't be able to control their own spending habits.

i dont know here but in HK the octopus card system its vital, and based or not in nfc the idea of using smartcards for payment accelerate the transaction and brings a lot comodity.

It will never replace money but somehow it simplifies a lot in buying and getting stuff for everyday needs like transportation, restaurants and little shops or stores.

eilegz said,
i dont know here but in HK the octopus card system its vital, and based or not in nfc the idea of using smartcards for payment accelerate the transaction and brings a lot comodity.

It will never replace money but somehow it simplifies a lot in buying and getting stuff for everyday needs like transportation, restaurants and little shops or stores.

Agreed. I would never want to go back to the pre-Octopus days when everyone is fumbling to get the right coins to pay the exact fare of public transport.

To everyone outside Hong Kong: NFC payments do not necessarily need to be linked to phones and credit cards. Our Octopus cards are like debit cards, you have to "Add Value" (deposit money) into it first (although you can apply for an automatic add value service which adds money into your card when the card runs out of value, one time per day maximum), and is a separate item conveniently credit card sized so you can put it into your wallet, or keychain sized so you can keep it safe like your other keys.

A lot of this article is nonsense.

1) credit cards aren't a "social experiement"
2) credit cards haven't "failed" - the problem is they were too easy to get hold of in the good times
3) credit cards are the safest way to spend money, as long as you pay off in full every month. it also builds up your credit rating and allows you to get a mortgage and loan later in life
4) NFC != credit card...if NFC payments behave like your debit card then the money is coming straight out of your account.

Sorry to the author, but I think your entire credit card/financial crisis argument is totally absurd/irrelevant. Not least because, at least in the UK, NFC payments are limited to transactions below £15.

The real argument against NFC is the security concern.

@LaP: yes it is still considered debt, but only for the time you haven't paid it off. the fact that you pay it off each month means it's not a problem.

That and most people give out their credit card over the Internet like it's candy.

fake av - "for only 80 dollars we will stop bugging you and let you open your applications. all we need is your credit card number."

The user - oh ok here it is.

Bhav said,
A lot of this article is nonsense.

1) credit cards aren't a "social experiement"
2) credit cards haven't "failed" - the problem is they were too easy to get hold of in the good times
3) credit cards are the safest way to spend money, as long as you pay off in full every month. it also builds up your credit rating and allows you to get a mortgage and loan later in life
4) NFC != credit card...if NFC payments behave like your debit card then the money is coming straight out of your account.

Sorry to the author, but I think your entire credit card/financial crisis argument is totally absurd/irrelevant. Not least because, at least in the UK, NFC payments are limited to transactions below £15.

The real argument against NFC is the security concern.

@LaP: yes it is still considered debt, but only for the time you haven't paid it off. the fact that you pay it off each month means it's not a problem.

1) Credit cards are a social experiment in that it unveils certain aspects of human behavior. Specifically, what happens when the physical idea of currency is replaced with the swipe of a card.

2) credit cards haven't failed. They're doing quite well, actually. The experiment showed negative behaviors in a lot of people, and that's failure I'm referring to.

3) Key words: as long as you pay it off in full every month. Ideally, if everyone thought like that, our economy probably wouldn't be in the shape it's in. But people don't, and that's the issue.

4) Credit and Debit have become somewhat interchangeable, and as balance transfers from credit cards become cheaper and easier, the difference between the two will simply come down to the fact that you have to repay credit, and you don't have to repay debit.

Right now, NFC payments are irrelevant. Very few retailers actually support it, and not enough devices come with the functionality to make it worth their while. As more people get on the NFC bandwagon, that 15 pound limit will be a thing of the past.

my one credit card has a NFC chip in it, been using it for a few years now.... and it sure does behave like a credit card.... I'd assume these device versions would be almost exactly the same... and my credit card one doesn't have a spending limit, as long as I have the credit in the account...

Bhav said,
A lot of this article is nonsense.
*snip*

Have to agree to all this, the article seems to talk an awful lot about the dangers of using credit cards. This must be a very american concept, cause my VISA card works like a debit card almost everywhere I use it. And even when it uses the credit card part the amount is reserved on my balance and withdrawn as soon as possible, no monthly bill or debt.

I would assume that a NFC card would/should work more like a debit card than a credit card, and as such the whole discussion about the evil of credit card would be mute?

I may be biased though, living in a country that more and more rely on debit cards as the payment method. I use "real" money maybe once or twice every three months, but I have no problem checking my balance and make sure I don't over use.

I wonder though what is considered a debt ?

I use my credit card to buy online. Every month a have between 100$ and 500$ on it. Is it considered a debt cause it's a credit card ?

I hope not cause i have more then enough money in my bank acount to pay for it,

LaP said,
I wonder though what is considered a debt ?

I use my credit card to buy online. Every month a have between 100$ and 500$ on it. Is it considered a debt cause it's a credit card ?

I hope not cause i have more then enough money in my bank acount to pay for it,

I imagine it is, and I am the same way specifically because of cash back features on my credit card. If I am going to buy it anyway, then the effective 1-5% discount on the item is just a nice perk that I always pay off at the end of the month.

LaP said,
I wonder though what is considered a debt ?

I use my credit card to buy online. Every month a have between 100$ and 500$ on it. Is it considered a debt cause it's a credit card ?

I hope not cause i have more then enough money in my bank acount to pay for it,


Debt is any amount of money you owe that is accululating interest. So let say you spend $200 on your credit card on April 1st. If you pay the $200 back to your credit card company when you get your bill on April 30th, it's not considered debt. But if on April 30th, you get you bill any only pay the minimum payment (lets say $30), allowing the remaining $170 to collect interest, then it's considered debt... I think lol

Brent1700 said,

Debt is any amount of money you owe that is accululating interest. So let say you spend $200 on your credit card on April 1st. If you pay the $200 back to your credit card company when you get your bill on April 30th, it's not considered debt. But if on April 30th, you get you bill any only pay the minimum payment (lets say $30), allowing the remaining $170 to collect interest, then it's considered debt... I think lol

Yeah but to me a real debt is when you don't have the money to pay right now.

For example my house is a real debt. I have the money to handle the monthly payments. I could pay a couple of months and even 1 year in advance. But i simply don't have the money to pay the whole thing. It's a debt.

In the case of a credit card even if you forget to pay it (hapenned to me 2 or 3 times) as long as you have enough money in your bank account to pay it when you want then it's not really a debt.

This is like a credit card. "Here's some money, just swipe your phone over this sensor and you'll have anything you want. Oh and don't worry about how much it all costs"...

I don't understand this technology really.. just me?

No, I don't want NFC payment systems. Not just from an "it's too easy to spend money" POV, but from a privacy and security one.

M2Ys4U said,
No, I don't want NFC payment systems. Not just from an "it's too easy to spend money" POV, but from a privacy and security one.

Same. It is very cool, but I dread to think of the number of ways this could potentially be abused. I get the impression with some recent technological innovations that they are being done because it is "cool", without any real thought or consideration for further implications.

The recent push to the "cloud" is another I think we are getting a bit ahead of ourselves on...

M2Ys4U said,
No, I don't want NFC payment systems. Not just from an "it's too easy to spend money" POV, but from a privacy and security one.
Exactly. I don't like the idea that someone can steal the information on my phone already. Imagine if it's also my credit card.

M2Ys4U said,
No, I don't want NFC payment systems. Not just from an "it's too easy to spend money" POV, but from a privacy and security one.

NFC is already in use in some parts of the world. Japan and Korea have been for years. It's just slow making it over here. The same procedures would apply if your cell was stolen to if your card was stolen. I don't see an immediate issue. I would definitely only link a cell phone w/ NFC to a pre-paid account though rather than a primary card or a debit card.

M2Ys4U said,
No, I don't want NFC payment systems. Not just from an "it's too easy to spend money" POV, but from a privacy and security one.
Yeah, like if someone made there own reciever and "bumped" into people on the tube and directed large sums of money.

Like you could do with an Oyster Card. This better not be a glorified RFID scanner.

M2Ys4U said,
No, I don't want NFC payment systems. Not just from an "it's too easy to spend money" POV, but from a privacy and security one.

So you're suggesting there's no privacy or security issues with credit cards today? All of my credit cards have a contactless payment feature (MasterCard PayPass) which is the same concept as NFC.

M2Ys4U said,
No, I don't want NFC payment systems. Not just from an "it's too easy to spend money" POV, but from a privacy and security one.

This reminds me of when the Internet was becoming mainstream and I was doing seminars on technology. People did not like the idea of typing in their credit card online to buy something, as they saw it like many people are seeing NFC, with inherent security risks.

However, the same people had no problem in handing their credit card to a kid at the restaurant, which was far more 'insecure' than an internet transaction at the time. Even using your card in a store at a card swiping terminal at the checkout stand is still highly insecure, as if someone like myself is in line behind you, and I can see your card in just a flash, I can memorize the numbers instantly. And this doesn't even account for all the nefarious people that have good cameras on their cell phones now that can snap the card of everyone in line in front of them.

Having the number printed on your bank card or credit card is highly insecure, and most people don't think twice about it. At least with NFC technology, your number is not display to any human.

As the internet shopping and transactions 'grew up' there were a lot of changes in security that went from using a secure connection to your browser, to how the credit card information is then processed by the retailer to how the information is stored and how long it is stored, and on to the next level that the data is no longer human accessible even if stored for a few moments during the transaction. The last one is still a process.

In the end, online internet started out being as secure as using your credit card at a store, and now is far more secure.

The for NFC payments, as there will be things that need to be tightened with regard to security, but it already elimates the 'visual' aspect of your information to strangers that are standing close to where you use it.

The rest will continue to get more secure, just like basic online transactions, and there will always be flaws in the system, but this is why you choose companies and banks that provide fraud protection so that if something does happen, you are not responsible for errant charges.

As for people worryiing about overspending or managing their money. There are new protections for credit cards and bank cards that you can sign with your bank to prevent them from overdrafting your account and charging you fees, it is a law, go ask the bank and sign the form. The rest is still up to the individual, as managing money for people and what they spend has been an issue for hundreds of years, even with the days of checks, they came out with carbon duplicates and other mechanisms for consumers to track their spending.

With NFC, if you are using a smart device, it will be better at keeping track of purchases for you than anything, as a credit card is able to tell you what it has approved, and neither is cash able to itemized what you purchased.

So with any new technology it is good to be 'suspect' but it doesn't mean we need to jump into irrational thinking of it dooming the world or being more insecure, when just the fact you aren't flashing your cards around in public with the number on it is already a step forward in security.


Side note, as with every evolution of currency mechanism, the US government has always stepped forward to centralized and standardize the rates of exchange and value of money. This happened with coins, and then with paper money, and also somewhat with checks. It is time again that digital money needs to standardized, so that the potential for fragmenting values and 'fees' and other mechanisms are not used against the consumer.

The US needs to setup a base digital currency model that banks and credit cards and paypals than then use to offer their services on top off, with a solid base foundation. We already deal with this at the electronic banking level, but it needs to extend a bit the consumer level of digital currency for the reasons I mentioned.

As NFC and other new technologies that deal with digital currency become available, at the very least a 'standard' needs to be fully defined by a non-corporate body, and living in a representative democracy like the US, this 'body' should be based on 'we the people', which is the government that is not beholden to any interests but the people, and has no financial motive.

Things change and in 50 years, people will be amazed that people use to carry paper and coins to purchase goods, just as it is amazing to us that people use to carry gold or use barter based currency to purchase goods.