Mobile Payment Solutions and Risks

As a consumer, mobile payment solutions using wireless communications are a quick and easy way to make retail purchases. For the service provider, imagine the benefits of being able to track consumer buying history with their current location.

How does it work? The phone must be equipped with a Near Field Communications (NFC) chip. The chip stores bank or credit card information in a secure manner. When the consumer is ready to make a purchase, the NFC chip wirelessly transmits the appropriate information when in range of a retail register.

Consumers have several alternatives for mobile payment solutions:

• Apple Pay. Apple Pay is a mobile payment and digital wallet service by Apple Inc. that lets users make payments using the iPhone 6, 6 Plus, and later.Google.
• Consumers download a Google Wallet application and may use a PayPass (does not require physical contact) Citi Mastercard or a Google prepaid card.
• Visa. With Visa's PayWave software, the consumer starts the application, initiates the payment process, and waves the phone near a compatible reader.
• ISIS. American Express, Visa, and MasterCard are partnered with ISIS to provide mobile payment solutions. ISIS's digital wallet application can be customized by the major carriers AT&T, Verizon Wireless, and T-Mobile.

Benefits

One of the benefits of mobile payment solutions is the ability to automatically track purchases. With merchant loyalty programs, the payment solutions can let the consumer know about the deal of the day or when they are close to receiving a free gift.

Merchants also benefit by being able to track consumers, their locations, and their buying habits. The technology also allows merchants to present consumers with a variety of offers and discounts:

• Ads can appear on Google Place pages that show listings of restaurants, retail stores, etc.
• Google search engine results pages (SERP) can display relevant ads
• Tied to a person's location, Google Offers can present consumers with specific geographic offers

Security and privacy

To make a payment, consumers must start the wallet application and press a button. At that point NFC technology encrypts the data when transmitting payment information to the retail device. Some vendors don't store banking and credit card information in the wallet. Instead, the sensitive information is securely stored on a chip. Even with these controls, security risks exist.

While most traditional wallets are carried in a pocket or purse, smartphones are frequently carried in your hand, placed on a table, or left next to a briefcase. Consumers must protect smartphones from traditional physical security risks such as theft or damage.

Since wireless technology is used, it may be possible to capture or intercept the transmission between the smartphone and the retail terminal.

Privacy issues arise when organizations can electronically track an individual's daily activities, locations visited, and purchases.

Summary

Mobile payment solutions allow consumers to easily make retail payments while redeeming coupons and offers. Marketers benefit by knowing past purchase behavior and combining it with real time geographic information about consumers. Consumers will need to weigh the pros and cons to determine if the security and privacy risks outweigh the rewards.

Mobile application security audits help organizations identify, manage, and reduce their risks. Formal and documented policies ensure a top down approach to managing security risks.