One of the best features to come with smart phones as of recently is the ability to pay using your phone. I can’t tell you how many times it’s saved me when I forgot my wallet.
Last week, I was meeting a friend for happy hour at a local sushi restaurant. We had a great time catching up, and just shooting the breeze. When we finished with our meal, my heart sank.
As I reached in my pocket, I had the sudden realization that I had forgotten my wallet!
Luckily I have a mobile wallet, that not only works on any digital payment system, but also works on older credit card machines that are only capable of reading a magnetic strip from a credit card! I simply told my server I would have to walk up to the cash register and use my phone to pay the bill.
The server looked at me with a blank stare, stating, “I don’t think our system is capable of using your phone to pay your bill.”
I asked if they could request their manager for me to try anyway, despite the servers’ skepticism.
Walking over to the register, which was equipped with a computer screen which included a credit card attachment, I asked if they would proceed as if I was paying with a credit card, and placed my phone close to the credit card reader. To the managers surprise, a receipt began to immediately print out as if they had swiped a credit/debit card through their machine!
Smiling contently, I signed my copy of my receipt and explained that some smartphones have a digital payment system that can work anywhere, not just on the NFC readers you may see at your local retail store such as Macy’s or Walgreen’s.
How does this amazing feature work? It’s not the software on your phone, but rather some nifty hardware already installed in newer phones. My hope is that this information will give you a bit more of an understanding of how these types of payment systems work and for which phones.
A Brief History
From tap to pay credit cards, to wireless cell phones. The way we pay for things has changed over the last decade. With the help of technology that’s been around for quite some time, we are able to pay faster and easier. No more swiping a card or faulty magnetic strips on our cards.
With Near Field Communications (NFC), or radio communication between two devices, our payments can be made more securely and easily. It started in 2007 when credit card manufacturers began making their cards with security chips that most of the world have already started using. Then progressing to adding an NFC chip inside the card, where card users could simply place their card over the credit card terminal with the NFC symbol on it.
Building on this idea, Google, Apple, Samsung, and other companies created peer-to-peer payment services. This meant that you can send and receive money from people from a mobile device or computer without being charged for it. Think PayPal.
Eventually this system would be integrated into apps within their mobile devices, allowing users to make purchases by what we now refer to as tap to pay, or point-of-sale purchases. There are currently three mainstream digital payment systems that are used on our phones.
#1 Android Pay
Android Pay is only available to Android users, and is the successor to Google Wallet. Originally, the Google Wallet app was used to exchange money from one person to another (peer-to-peer payment), just as PayPal does, on top of being able to use it as a form of digital payment through NFC featured credit card machines. NFC credit card machines are those that have been updated with the tap-to-pay feature, that is usually indicated by the NFC symbol (those bunch of wavy lines that increase in length as seen below).
A joint venture between US phone carriers Verizon, AT&T, & T-Mobile, created their own digital payment platform called Softcard, which used NFC to make purchases in stores and restaurants that accepted NFC payment systems. In February of 2015, Google acquired the company Softcard, and the merger lead to the current service we know as Android Pay, exclusive to Android phone users.
One of the nice features about the Android Pay is that you don’t even need to open the app. Simply bring your phone close to the payment terminal, and Presto! Your purchase has been made. This is all contingent on whether or not the credit card terminal is NFC compatible or not.
Android Pay keeps track of your loyalty cards from stores you frequently shop at, can hold multiple bank cards or information, and any gift cards you may have for stores. It makes shopping or paying for things, that much easier.
Android phones that are NFC capable, and running KitKat 4.4 and above. This means your phone doesn’t require a finger print scanner, as some older phones do not have this capability, but still meet the requirements mentioned. The downside, is that Android Pay is only available in US, Hong Kong, Singapore, UK, and Australia.
The great thing about Android Pay, is that Google is ever expanding what banks it is teaming up with to allow their system to work virtually anywhere you go. In the US for example, it works with your credit and debit cards from the following US financial institutions: American Express, Discover, MasterCard, and Visa. These cards are issued by the following US banks and credit unions: American Express, Bank of America, Discover, Navy Federal Credit Union, PNC, Regions Bank, USAA, US Bank, Citi, Wells Fargo, and Capital One.
In the UK, it works with these financial institutions: Visa and MasterCard cards are supported. These financial institutions support Android Pay in the UK: Bank of Scotland, First Direct, Halifax, HSBC, Lloyds Bank, M&S Bank, MBNA, Nationwide Building Society, Natwest, Santander and Ulster Bank.
# 2 Apple Pay
Like Android Pay, Apple Pay is the iPhone’s very own digital payment system. It works very much similar to Android Pay.
Unlike using a physical card, Apple Pay allows you to pay with your iPhone, iPad, or Apple Watch by simply placing it near the payment reader. Apple Pay also allows you to pay for items online, such as apps, or at various stores on your Safari web browser.
Apple Pay is a way for iOS users to save their rewards cards, bank cards, i.e. credit or debit cards, and gift cards. Simply place your finger on the touch ID to use your selected card.
Tim Cook, Apple CEO has sought out to fix the payment systems of today by creating this secure payment process.
“This whole process is based on this little piece of plastic, whether its a credit or debit card,” Cook said on stage back in 2014. “We’re totally reliant on the exposed numbers, and the outdated and vulnerable magnetic interface — which by the way is five decades old — and the security codes which all of us know aren’t so secure.”
Apple Pay has become a generic trademark, where it is synonymous with the idea of digital payment systems. Even though Android Pay uses the same basic technology, and similar security, and similar aim at making payments easier for consumers.
As with Android Pay, Apple Pay utilizes the Near Field Communication built in to the phone. This is just a fancy way of saying, there’s something built in your phone that allows you to pay at select stores by simply putting your phone close to the card reader and allowing it to read your payment information.
Since its release in 2014, Apple Pay has increased the banks it can be used with, the stores associated with reward points, and the countries it can be used in. It works with the iPhone 6, 6 Plus, iPhone 6S, 6S Plus, iPhone 7, 7 Plus, iPhone SE, and later, Apple Watch-compatible devices (iPhone 5 and later models), iPad Air 2, iPad Pro and iPad Mini 3 and later and Mac.
The chart below shows which countries support Apple Pay to date.
# 3 Samsung Pay
Last but certainly not least, Samsung Pay is Samsung’s exclusive form of phone payment. As with the other digital payment systems, Samsung Pay can use the NFC tap-to-pay feature in select retail stores.
What makes this digital payment system stand out from the rest, is that it works on the older credit card machines that do not have NFC reading capabilities. What does this mean for the consumers? It means that it can work on almost any machine!
In 2015, Samsung paid a substantially large amount of money to purchase another company called LoopPay, and their technology for digital payments.
Unlike Apple Pay or Android Pay, Samsung Pay uses the technology acquired by LoopPay called Magnetic Secure Transmission (MST). With this technology, you can turn the magnetic card reader on most credit card terminals, into a wireless reader.
So not only does Samsung’s new phones utilize NFC which the other digital wallets/payment systems use, it also comes with a new type of technology which uses the old magnetic strip, giving you more payment options!
Like the predecessors before, Samsung Pay allows you to store specific bank cards, or credit cards, reward points, and gift cards on your digital payment system.
One of the nice incentives Samsung is doing to entice users to utilize this form of digital payment, is to give promotional rewards! For example, with your first purchase using Samsung Pay, you will receive a free $15.00 Samsung pre-paid visa gift card.
You can use Samsung Pay in South Korea, the USA, China, Spain, Singapore, Australia, Brazil, Puerto Rico, Russia, Malaysia, Canada, United Kingdom, Thailand, Taiwan, and Turkey. The only downside is that Samsung Pay only works on newer phone models, as it is a hardware edition. Currently it works on Samsung Galaxy S6, Samsung Galaxy S7, Samsung Galaxy Note 5, Samsung Galaxy A5, Samsung Galaxy A7, Samsung Galaxy A9, Samsung Galaxy Note 7, Samsung Galaxy C5, Samsung Galaxy C7, & the Samsung Gear S2 watch.
Future of Digital Payment Systems
Imagine not having to carry around all your debit/credit cards, reward cards, and gift cards, and being able to have them all virtually in one place! Your wallet would be thanking you, not stretching its seams out and over stuffing it with cards galore.
This feature is also handy for those that want to keep track of every expenditure they make, as it not only is saved on the digital payment system you choose, but on your card statement as well.
Unfortunately, not everyone is using this amazing feature on their phones. Some people are a little hesitant to add their financial information on a smartphone.
Fears such as losing your smartphone and allowing someone to have access to your credit card or debit card information can be an unnerving feeling. This leads to many users not to use this new feature provided by most smartphone operating systems.
Most of these fears are unwarranted however, as there are several security precautions to prevent just anyone from using this feature on your phone, or from extracting financial info if your phone is lost or stolen. There have been no recorded incidents in which financial information has been stolen from using these Digital Payment Systems.
All three digital payment platforms change the original credit card numbers in order to ensure that if anyone ever had access to your digital payment account, they would not be able to steal your credit card information or have it hacked into. The other nice thing is for the devices that have the updated finger print scanner, it adds an extra security, as no one else could use that payment system without having your thumb print or security passcode you set up. Another great thing about using the NFC technology means that unless you are millimeters from the mobile payment device, you would not be able to complete the transaction, transferring your money from your debit/credit card.
With everything new, people will always be skeptical. For those of you that are old enough to remember the first time a website allowed you to use your credit card to purchase something, people were very cynical about putting their credit card information online. We will just have to see how this new technology pans out, or if a marketing plan is in order to make people feel more secure.