Can Your Smart Phone Double As Your Wallet Yet?

With the advances in smart phone technology and online banking, money is becoming more mobile. Host Scott Simon talks with Glenn Derene, senior technology editor of Popular Mechanics magazine.

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SCOTT SIMON, host:

This is WEEKEND EDITION from NPR News. I'm Scott Simon.

Many Americans get through a day, even a week, without paper money. These days, people use credit or debit cards to pay for a cup of coffee or a subway fare, not just a major purchase. Money has become mobile, and the next technological advance may even make cards antique.

Glenn Derene, the senior technology editor for Popular Mechanics, joins us from our studios in New York.

Mr. Derene, thanks very much for being with us.

Mr. GLENN DERENE (Popular Mechanics): Thanks for having me.

SIMON: So I gather that there are some smart-phone companies that are trying to change or even abolish the credit card.

Mr. DERENE: Well, actually, it's the credit card companies as well as the phone carriers that are interested in turning phones into credit cards themselves - in other words, essentially taking over the function of the many cards you might have in your wallet.

SIMON: And the credit cards companies might find this appealing because they can get out of the plastics and paper business.

Mr. DERENE: That's true. And it allows them a lot of flexibility. In fact, it's interesting: This is as much a business story as it is a technology story, because the technology that they're trying to implement is actually not brand new, and is even found in some of the contact list cards that exist right now.

SIMON: I dont know what a contact list card is.

(Soundbite of laughter)

Mr. DERENE: Well, essentially, there are a lot of credit cards right now that have an embedded chip in them, that allow you to just tap and pay.

SIMON: Mm-hmm. Well, let me get my wallet out, sorry.

(Soundbite of laughter)

SIMON: So a contact - I have no idea about this. So I'm looking at both a Visa and an American Express card. American Express has printed on the top of my card: Dont take this card from this man.

(Soundbite of laughter)

SIMON: But in any event, so there's a chip in these things nowadays?

Mr. DERENE: Some of them, there is. In fact, a lot of people are carrying around what's called an RFID, a radio-frequency I.D. card. And they dont even know it. A lot of credit cards right now have these things embedded in them, and a lot of corporate cards, for instance, when people just wave a card to get through a door, it's all the same technology. And the idea is that they want to embed that into little chips that would go inside your phone.

SIMON: Mm-hmm.

Mr. DERENE: And in many stores across the country, people have been tapping to pay for coffee for a couple of years now.

SIMON: And there's some areas of the world too, aren't there, in which mobile phones are being used as devices of commerce already - I mean, even transmitting large amounts of money.

Mr. DERENE: That's right. In the developing world especially, phones tend to be a good way of doing your banking because essentially, people dont necessarily live near a bank branch, and banks can't make a good business case for rolling out bank branches deep into areas where there aren't a lot of people. And yet the mobile infrastructure has rolled out to those areas. It's far more widespread than other forms of commerce are. So you end up seeing banking piggy-backing on top of the cellular - the basic cellular communications.

SIMON: Mm-hmm. And I gather that this has been an advantage to - actually, some organizations weve probably done stories about on this show, where, for example, an NGO that's working in a certain country no longer has to worry about physically putting money into a payroll on a truck that might be vandalized. They can just hit a transmit button, and everybody who's been working for them gets paid.

Mr. DERENE: Yeah. And this is really just the outgrowth of the way that banking has become pretty virtualized. So once money becomes data, you can transmit the information that essentially carries that money over cellular networks pretty easily. And there are some obvious security concerns for all of this stuff. Hackers can potentially compromise a lot of these systems, but there's also a lot of security benefits as well, and you just mentioned one. Rolling a truck full of money out is probably as likely, if not more likely, to get stolen as sending out a lot of bits that equal money.

SIMON: Well, explore some of the disadvantages with us, too, though, that people might feel as they hear about this brave new world.

Mr. DERENE: Well, it's interesting. Like I mentioned, there's the security issue. In fact, with RFID credit cards, people have already demonstrated -researchers have already demonstrated that you can hijack these systems. You can, with the right equipment, essentially sort of brush by somebody and get the information off of that card, off of that chip.

And then there's just the sort of consumer confusion that can go on with this. The last thing that the credit cards companies want to do is make the process of paying for something any more complicated than it has to be.

SIMON: And, of course, then you can't pay for a cup of coffee if you've neglected to recharge your cell phone.

(Soundbite of laughter)

Mr. DERENE: It's an interesting point. Yeah, youre right. And...

SIMON: Or if you leave your cell phone on the subway.

Mr. DERENE: Also a very interesting concern that people could have. I mean, everybody has probably had the experience of losing a cell phone. It feels like your entire life has been lost. And if your wallet is essentially in your cell phone as well, it's sort of a double whammy.

SIMON: Mm-hmm. I can remember a number of years ago, when people said: I will never line up at a wall to get cash.

(Soundbite of laughter)

Mr. DERENE: And now people do it routinely, of course.

SIMON: Yeah. And I can remember when people said that they would never use a credit card to pay for groceries or at a drugstore because that way, their purchases could be monitored. And if they bought Playboy or rutabagas, someone would be able to tell.

Mr. DERENE: Well, actually, it even goes further with - the possibilities go further here. When you integrate payment systems with a device that is connected wirelessly, and you also have GPS devices integrated into a lot of these phones now as well, you can push out deals and promotions and advertisements.

SIMON: Yeah. As youre reaching for the rutabagas, you could get a message saying: And you might want to try the tomatoes, too.

Mr. DERENE: Exactly.

SIMON: And I suppose you could also, if youre reaching for a Boston cream pie, you could get an email from your doctor saying: Dont.

Mr. DERENE: You could, conceivably, but I doubt the credit card companies are going to want to have that one pushed on to you. They want you to buy the cream pie.

(Soundbite of laughter)

SIMON: Well, Mr. Derene, thanks so much.

Mr. DERENE: Thank you. Thank you.

SIMON: Glenn Derene, senior technology editor for Popular Mechanics.

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