Mobile Payments: Don't Buy into It

Hackers are counting on all of us to use our smartphones for purchases, so don't buy into this ill-equipped technology, writes Bill Snyder of CIO.com. Mobile phones are simply not secure enough yet to be used like a credit card.

By Bill Snyder
Mon, June 27, 2011

CIO — If you're anywhere close to my age, you might remember the late Orson Wells making a pitch for Paul Masson saying, "We will sell no wine before its time." That boast may have been true for the vintner, but sadly it's not true in the technology industry.

Case in point, the growing hype for a soon-to-be-released technology called near-field communications. A near-field chip in your smartphone will allow you to make a purchase by simply swiping the phone near a specially designed terminal that will then pick up your credit or debit card information over the air and complete the sale.

Sounds great, and it may well work someday. But for now, it's far from ready for prime time and if someone tries to sell it to you in the near future cover your ears and shout La La La La.

The main issue is security, and that's largely because cell phones are simply not very secure, at least not yet. Mobile payments, says Ira Winkler, author of the book "Spies Among Us" and president of Internet Security Advisors Group, "are a disaster waiting to happen."

What's more, there are serious issues on the merchant side as well. Techno-marketers are touting a vision of buying a candy bar or a soda with a quick swipe of the cell phone, but remember, merchants pay a fee for every single transaction using a credit or debit card.

It makes no economic sense for them to spend money upgrading their credit card machines and then make almost no money on small purchases. Unless, of course, they jack up prices to make up for that lost margin, something you, the buyer, probably wouldn't like.

Cell phones are Insecure

If you've paid much attention to the news about technology recently, you know that not a month goes by without news of a serious security breach. There's a reason for this plague of malfeasance and it's not just because some technologies are rolled out too quickly.

Hacking is no longer about fun and games, it's a very serious business conducted by organized gangs, many based in Eastern Europe and Asia, with the goal of making money. Modern hackers zero in on targets that have lots of users — that's why there are so many more attacks on Windows computers than on Macs, though that's starting to change. It reminds me of the famous story of Willy Sutton, the Depression-era bandit, who when asked why he robbed banks replied: "Cause that's where the money is."

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