Security Concerns Dog Near Field Communication Technology

Visa’s recent interest in near field communication technology, combined with news story upon news story about hacked bank accounts, has made consumers understandably nervous about the safety of their data. A transition from the (seemingly) secure swipe and PIN or signature method to a new NFC smartphone payment systems might not go over well with wary customers.

The PlayStation incident is still fresh in Americans’ minds. In April, hackers broke into the PlaySation Network and allegedly stole users’ credit card data. The Sony credit card scandal reinforced a lesson that consumers have seen time and again: credit cards are not secure. In early 2009, a major payment network disclosed that a breach had possibly exposed tens of millions of users’ data in one of the biggest data leaks in the nation’s history. Heartland Payment systems announced that credit card numbers, expiration dates, and even cardholder names had been compromised. What’s more, Heartland processes transactions between card networks and merchants. Hacking into their data sent data from MasterCard, Visa and American Express clear into space, leaving cardholders vulnerable to credit card fraud.

Security concerns haven’t stopped market heavyweights
Despite significant security concerns, many major players in the payment, Internet and smartphone industry have forged ahead with NFC technology. Google partnered with MasterCard and Citigroup to develop an NFC mobile payment system, which works on the newer versions of the Android. The iPhone 5 (when it comes out) is rumoured to have NFC compatibility as well. Industry experts say that near field communication is secure – at least, as secure as a credit card. Because smartphones are essentially tiny computers, the phones’ systems can include strong cryptography and other security protocols. Still, it’s possible to pick up data from an NFC transaction from a distance using an antenna.

Consumers are also not used to protecting their smartphones from intrusion. A study found that less than 50% use passwords or keypad locks on their phones, and that users were more concerned about receiving unwanted ads than virus attacks. But privacy and security concerns remain a barrier to NFC adoption: half of consumers who haven’t tried mobile payments cite tracking by payment services or the possibility of fraud as major reasons.

Visa will require NFC compatibility
Visa, one of the two biggest players in the payment network arena, will require merchants to have NFC payment processing systems by April 2013. This is sure to accelerate the use of mobile payments, but whether the technology will spread beyond tech-heavy Silicon Valley is anyone’s guess.