Improved Security Could ‘Sell’ Mobile Payments to Consumers

Mobile BofAThis past weekend I received a notification from Chase that there had potentially been a fraudulent transaction on one of my credit cards. I bought a mattress for my younger daughter in Macy’s several weeks ago and a second charge for the same amount ($868) showed up yesterday.

My guess is that some person (an employee probably) at Macy’s used the card number as part of a broader scheme involving credit card fraud. By ringing up a second transaction for an identical amount, perhaps the fraudster was hoping that neither the cardholder (me in this case) or the bank (Chase) would notice.

They did and we closed the account. However the episode got me thinking about mobile payments, fraud and security.

While there are a number of mobile payment methodologies, generally speaking, mobile payments are more secure than card swipes. And in may situations the merchant or its employees don’t gain access to the card number directly. Such a payment scenario would have prevented the fraud above.

Alternatively the Macy’s app included payments I could have paid that way and avoided handing over my card. Of course any card data on file in a retailer’s database could be hacked by shadowy Eastern European criminal syndicates (see Target). But there are systems that don’t result in a merchant having any credit account information on file (e.g., Zapp in the UK).

Ironically one of the barriers to consumer mobile payments adoption is security concerns. This was true back in 2009 and it remains true today. Because they’re new and  unfamiliar consumers see mobile payments as less secure. But the “industry” could change that image by promoting mobile transactions as more secure than traditional POS card swipes.

I suspect if — today — there were an effort to market the security of mobile payments it would resonate. So far convenience hasn’t been enough of a reason for consumers en masse to seek out and use mobile payments — except in specific apps and vertical contexts. However in the wake of the Target et al retail fiasco, the time is ripe for mobile payments purveyors (PayPal, banks, etc.) to generate TV commercials and online video touting the security benefits of their systems vs. traditional credit cards.

Security isn’t sexy but right now this might the thing that could drive broad mobile payments adoption. What do you think?

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