The Electronic Wallet

Last week, MasterCard announced a new project in conjunction with Google, Citibank and First Data to launch the first electronic wallet in North America.  The concept is very simple… instead of carrying your credit cards, bank cards and other identification in a physical wallet, all this information is stored in an app on your smartphone.

As smartphones become the companion of choice for most of today’s society, this announcement seems to be a natural progression in the payments industry.  Studies have already shown that we are 80 percent more likely to turn around and go back home to retrieve a forgotten cell phone over a forgotten wallet.  After all, we can make it through a day without spare change for that coffee or our ID but how could we ever make it through a day without the immediate retrieval of our emails or worse, access to the news feed of our Facebook account?

The product will leverage the MasterCard PayPass NFC (Near Field Contactless) technology and ideally be able to be used at all merchant locations that can currently accept Paypass transactions.  Although Contactless has had a measly impact on the Canadian marketplace to date, it’s safe to say that it’s definitely more commonplace in the US.  And, of the two existing brands with contactless technology, MasterCard is definitely leaps and bounds ahead of their competitor, Visa in not only merchant acceptance but card issuance as well.

But are we ready for mobile electronic wallets?  As consumers, the first inclination would be to wonder about the security of the product.  And who can blame us, after the YouTube videos of electronic pickpocketers were splashed all over the internet last year.  Thieves carrying around contactless readers in their trenchcoats (because all bad guys wear trench coats!) and holding the readers up to our purses or back pockets to read the data on our credit cards in our wallets.  What’s keeping the same from happening with our phones?  Well, first of all, the same way your phone can’t spontaneous send an email without your command, the phone has to be activated and enabled to process a transaction prior to someone being able to read the RFID reader in the phone.  And as a consumer, you will also need to confirm and approve the transaction prior to it being sent for processing.  So actually, the electronic reader could be a safer environment for your contactless credit cards.  (However, it should also be noted that all those “scary” videos on YouTube about the electronic pickpockets were developed by a company selling leather wallets that are supposed to prevent the unauthorized access to your credit card.  It’s questionable how many thieves would actually go to the trouble to outfit their trenchcoat with enough technology and wiring to support a local coffee shop only to gain access to the limited amount of cards that are currently contactless enabled)

So as a merchant, how do you ensure you’re ready to accept these new cards?  As always, the first thing to do is to speak with your Acquirer. While MasterCard has announced this new project, it could still be a few months before it will hit the US market, let alone the Canadian market.  But it may be a good idea to get some practice in accepting contactless payments. Ask your Acquirer about accepting contactless cards, all three brands in the Canadian marketplace now offer it, MasterCard Paypass, Visa Paywave and Interac Flash.

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Matthew Hunt has been helping small businesses get set-up with Canadian Merchant Account Services since 2007 and helped 1000's do so. Join Matthew on Google+.

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