The Changing World of Payments


During one of my recent trips to Starbucks, which admittedly is a frequent occurrence, I ordered my usual Grande Americano with just a small amount of room left for cream. The barista then announced a familiar total of approximately $3.00 for the carefully crafted Espresso that is so essential to my day. I then held up my smartphone with the Starbucks Mobile Application barcode displayed, the barista scanned the barcode, and I was on my way in less than 30 seconds.

This was a vividly different experience from two years prior when I still had this same habit of frequent trips to Starbucks, but the process to pay for my drink was much more of a burden.  At that time, before many mobile payment applications even existed, I had to fumble around in my physical wallet to determine whether I had the correct change and what the most efficient combination of dollar bills and coins would be, just so that I could repeat the same process in reverse to put my change back in my wallet. Thankfully those times are over and the simple swipe of my finger make getting my necessary dose of caffeine better in every single way. All I have to do is open an app, swipe my phone, and the transaction is complete. No change, no physical paper bills, just pure simplicity and convenience.

But what about peace of mind? With all of the recent news of credit card data breaches at Target and Home Depot it is prudent to consider the potential negative outcomes of paying with your phone which is linked to nearly all of your personal data. Many, including myself, would argue that the recent data breaches at large retailers are due to a lack of changing technology rather than new technology. The technology that hackers were able to access during the data breaches is well over 20 years old and has remained nearly unchanged since then. That is why the recent wave of mobile payments on smart phones should be welcomed by those worried about security. Unlike traditional plastic credit cards, most mobile payment apps do not store your personal information in the application itself. Instead, they are able to generate a unique code that is related to each transaction and/or your device, which is then relayed to your credit card company so that you are charged the appropriate amount. The card and personal information is never exposed and if your phone is lost or stolen all payments can be halted remotely so no damage is done.

Like most things in technology, we should expect some growing pains before mobile payments are fully integrated into our everyday lives. However, over the next four years payments made in store by mobile devices are expected to grow by nearly 50 times to more than $180 Billion. It appears the days of paper money and plastic credit cards are numbered.