Ann Arbor Area Business Monthly
Small Business and the Internet

Cash or Credit?

October 2014

By Mike Gould

… is what your check-out person used to say back in the days when credit cards were new and the world was young. If you said “credit”, the checker would take your card, place it atop a carbon paper-infused ticket, lay your plastic card on that and run it through the zip-zap machine. Then, if the world was really young, she or he would then pick up a phone and call up BankAmeriCard or whomever, and verify your numbers.

Then they figured out how to automate that by hooking up the mechanism to a phone line. Then they figured out how to embed credit info magnetically so you could swipe your card yourself. And then they invented the iPhone 6 that does away with the entire process. Sorta. So the new question will be: “Cash or Phone?”

A Brief History of Payment
See above, which leaves out the really paleo-payments involving scales, pieces of eight, and abaci. The entire march of progress is about relieving you of the onerous duty of hauling money around.

From little pouches filled with pesetas, to billfolds filled with Benjamins, to debit/credit cards, virtual online PayPal transfers, and the brand-new wireless-based systems, we are getting farther and farther from the business of actually handling money back and forth. That is mostly a good thing: cash can be easily stolen by robbers, counterfeited by evildoing engravers, and lost behind the couch. And it is harder to conceive of a more likely vector for disease than paper objects passed from hand to hand in plague times.

But it is also a two-edged sword: it gives a snooping government and corporate data miners more info about your purchases, opens a door to hackers and other cloud-nappers, and leaves you totally at the mercy of whoever you select to handle your transactions. Not that any of this is particularly new, just a continuation of a trend.

Wireless-ness
This aspect of technology started in 1988, when the first patent was issued for Radio-Frequency Identification, or RFID, the underlying technology upon which they entire system relies. I wrote briefly about RFID back in 2007 (URL below):

Radio Frequency Identification. This is what busts you if you try to shoplift from Borders [heh, 2007, all right]: a little tag pasted into a book will activate a door monitor if it doesn’t get de-activated at the counter. The door jobbie is a radio transmitter that pings (GeekSpeak: sends a signal to) the tag in the book via radio waves. An antenna in the tag picks up the signal and replies “Bought” or “Stolen”, setting off an alarm or passing you through. This technology will be more and more important this year because the US is starting to use it in passports. This is highly controversial as the software behind this is not terrifically secure …

So that was then and this is the future: VERY secure financial data transfer over wireless.

Tapping and Paying
For once, Apple didn’t invent something; they took an existing Tap and Pay procedure from Android and tweaked it, and we will see how the experience plays out once the new iPhone 6 hits the shelves at the end of the month. The newly announced Apple Watch is also rumored to have this feature, but we have to wait until next year when they are released to find out.

Here’s a new acronym to learn and share: NFC: Not For Cash. (Kidding.) This stands for Near Field Communication, and it means that something like a smart phone/watch/decoder badge can sit next to a receiver built into a checkout terminal, and the two devices can send data back and forth wirelessly. As the Near would imply, this only works within a few inches of the process, which makes data interception by bad guys very difficult. Contrast this with WiFi, which works out to around 20 meters, which is why it is pretty easy to intercept emailed credit card numbers, etc., resulting in WiFi’s notorious rep for criminal shenanigans.

Google Wallet is a means of NFC payments using certain Android phones, and has been available since 2011, but it really hasn’t taken off in spite of having suitable receivers at various vendors such as Macy’s, CVS pharmacy, and Walgreens, among others. It’s a chicken-and-egg thing; you need a critical mass of users before an investment in a payment terminal pays off for a merchant, and enough terminals available before users make it into the post-swipe era, using phones instead of cards.

So now we have Apple with their mammoth, well-heeled fan base suddenly making this sort of service available, and it is looking like this will propel merchants into finally getting behind the technology. The timing is pretty good as well, as stores are being forced by insurance companies to upgrade their card-based systems to allow cards with embedded security chips to be used. If you have to spend $300+ to upgrade your terminals, you may as well enable NFC at the same time, is how the Wall Street Journal is seeing it.

It is to be remembered that a lot of technology we take for granted was invented elsewhere, but it took Apple to make it popular: USB, WiFi and CD/DVD-enabled laptops, and now, NFC iPhones.

Security
At this time, celebrities of the world are still reeling from the theft of their naked selfies from Apple’s iCloud. With this sort of revelation, should we trust Apple to manage our shopping? Apples and oranges here; the new Apple Pay system involves a difficult-to-explain-when-you’re-at-the-end-of-your-alloted-word-count token scheme that involves Apple not storing any of your account data on its servers; everything is encrypted, and the data is time-limited so that theoretically, payments are as safe as banking gets, and way more secure than current credit card transactions. Which isn’t saying a lot, actually.

News Flash:
This is the 200th column I’ve written for this magazine. Thanks for your patience.

RFID (and other news for 2007 – also pretty funny IMHO, looking back at it)
http://mondodyne.com/b2b/smbiznet.107.shtml

Wall Street Journal article:
http://online.wsj.com/articles/will-stores-warm-up-to-apple-pay-1410392952

Explanation of Apple Pay token system:
http://www.zdnet.com/apple-pay-and-security-could-tokenization-be-the-tool-that-curbs-data-breaches-7000033585/

Mike Gould might buy an iPhone 6 (but just for the better camera), was a mouse wrangler for the U of M for 20 years, runs the MondoDyne Web Works/Macintosh Training/Digital Photography mega-mall, builds laser display devices, performs with the Illuminatus 3.0 Laser Lightshow, and welcomes comments addressed to mgould@mondodyne.com.

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