Swiping credit cards from mobile phones
New technology is coming in that will mean that credit cards can be swiped from mobile phones. This is aimed to serve two purposes, firstly to increase credit card security when used over the phone and secondly to allow more retail outlets to accept credit cards as they no longer have to have the equipment and merchant accounts.
Small card readers have been trialed in a number of places, with the biggest trial being Barclaycard trialing the small card readers in the UK market. Although Barclaycard is a second tier credit card provider in the United States it is the UK’s oldest and one of its largest credit card providers. This trial affected a large proportion of British credit card users.
The trial had a mixed result with a number of users complaining of the added inconvenience of having to have a small card reader with them at multiple locations, particularly home and work, if they wanted to make a purchase from more than one place. The trial was limited to internet purchases. Barclaycard claimed to see a significant reduction of fraud from the trial.
The Barclaycard small trial reader was designed to be used with personal computers for internet purchases. However a number of devices have been designed to be used in conjunction with mobile phones. Square, a San Francisco based company founded by one of the co-founders of Twitter, claims to have produced a small card reader that is able to be used in mobile phones and is aimed at “micro businesses” such as taxi drivers, street stalls and small restaurants. These businesses are largely unable to offer credit card purchases, and with the growth of credit and debit card spending these cash only businesses are finding this a disadvantage.
The small card reader plugs into the phone jack of an i-Phone, although other high end phones such as the Blackberry are intended to be added to this. There are large concerns from credit card providers that this system will have a poorer anti-fraud protection than current merchant card machines.
Some providers of card readers offer small card readers to existing customers, but as a supplement to the large card readers and not as an alternative.
Many mobile phone companies have explored using mobile phones as an alternative payment system to credit cards as they are more able to deal with “micro-payments” such as buying from a soft drinks machine, in the same way that mobile operators deal with small payments for individual calls. There are soft drinks machines in Finland and Japan that accept payment by mobile phone, but this model has not gone very far.