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Digital Wallets Have Yet To Catch On, JPMorgan Executive Says (reuters.com)
Despite major tech companies working aggressively on making digital wallet solutions available everywhere, these digital payment apps in our smartphones are yet to gain traction, according to Chief Executive of Consumer Banking JP Morgan Chase & Co. From a Reuters report: Apple Pay, Android Pay, and Samsung Pay are being used for less than 1 percent of payments at retailers, Gordon Smith said, citing industry data at an investor conference. Ultimately, the convenience of paying with phones will bring a surge of use from consumers, but it is impossible to know when that inflexion point will be reached, said Smith.
I bank with a decent sized local credit union. After they got finished patting themselves on the back for their technological advancement rolling out EVM cards, they refuse to support any of the digital wallets, including Apple's, Android's, or Samsung. Their reasoning (at least as of December 2015) is that no one is using them.
Well, it's kind of hard to use them if you don't support them and permit the card to be tied to a digital wallet. So we have a chicken an an egg problem. They won't be supported until usage goes up, and usage won't go up until they're supported.
The end user wants a single system that will work at most of the places they buy things at, regardless of whether they switch back and forth from iPhone to Android, and regardless of which bank and credit card they have.
Until the various industry players swallow their greed and agree to get together in a strong standards definition and implementation process and revenue sharing process that gives users this kind of universality, the momentum will continue to stall.
Where are we going and why are we in a handbasket?
First, I don't trust the security of the phone. There is nothing on my phone that I would care about if a hacker got it. No logins, no passwords, no addresses. Just a couple apps and several phone numbers.
Second, I don't see why I should give big companies yet another chance to mine my data. Especially something as sensitive as my spending habits. I still use cash a lot for this very reason, every year my credit card company sends me a statement showing me exactly how closely they track my spending.
If properly implemented, and it seems Android and Apple do, contactless payment via your smartphone is a lot more secure than anything else. Some advantages it has:
1) A proxy number can be used for each transaction. Your real number need never be used at any time, as a proxy can be created for each transaction. The bank lets the phone know what proxies to use, and the phone lets the bank know when they are used. so even if the merchant gets completely owned, the information gleaned on you is useless as it was valid for that transaction only.
2) You have a device that can notify the bank of the validity of the transaction. Not only will the payment terminal contact the bank for payment, but your phone can let the bank know as well. Now there has to be some slack built in the system to make sure that it can work even if you don't have signal, but basically when your phone gets back on the network if the transactions don't agree, a flag can be raised.
3) You have some defense against a compromised terminal that overcharges (basically a merchant that has messed with their terminals to charge a different amount than displayed. Your phone knows how much the charge was, and shows it to you. If that is different from the amount on the screen, you can contact your bank there and then and stop the transaction.
4) The two-factor auth is taken off the device, on to your device. You have to unlock your phone to use the payment, so you have a 2-factor setup (your phone + either code or biometrics). However with chip+pin, the pin is entered on the terminal so if it is compromised, it can get your pin. The terminal can't get anything when a phone is used as the auth is on the phone, not the terminal.
It isn't flawless, but it is a decent step up from the security of just using a card.