New payment technologies: are we sacrificing safety for simplicity?

We may be facing an economic downturn, but in terms of technology, buying has never been easier. Whether you're paying for a meal or just a carton of milk - new technologies such as mobile- phone apps and contactless cards mean you don't have to enter your pin or carry cash. You simply wave your phone or card near the terminal and you're off. But how do these new technologies work? And are they leaving us vulnerable to identity thieves?


How does it work?


Mobile-payment apps such as Google Wallet mean you can store your credit or debit card information on your phone and scan it at the checkout. These apps rely on Near Field Communication (NFC), which allows a device to collect information from another device or NFC tag at close range. Many of today's phones come NFC-enabled and you don't need to purchase the app at all.


Contactless payment systems, such as MasterCard or VISA PayPass, work on the same concept. Also known as "wave and pay", these are credit cards, debit cards, smartcards or other devices that use Radio-Frequency Identification (RFID) or NFC technology to allow you to make payments. The embedded chip and antenna mean consumers can wave their card over a reader at the point of sale.


There is no doubt that we're heading into a new era of ease when it comes to payments, and technophiles are taking them up with gusto. But what does it mean for customers who like to protect themselves?


How safe is the new technology?


For many of us, safety is paramount - and for good reason. A shocking 3.8 million Australians are victims of identity crime and financial fraud according to a Debt Study released in July 2012*. Matthew Strassberg, Equifax Senior Advisor said: "Identity crime is a thriving industry in Australia, with the Australian Bureau of Statistics estimating the cost of personal fraud to consumers at $1.4 billion dollars a year."


These figures are frightening. But do these new technologies leave us more vulnerable than transactions of old?


The general consensus seems to be - not really. Contactless cards and mobile-phone apps use the same chip and PIN network as normal credit and debit-card transactions - and you can only spend up to AU$100 before you have to enter your PIN or sign. If you lose your phone or card, or it's stolen, transactions made with them have the same fraud guarantee as standard transactions. Having said that, you must be vigilant when it comes to protecting your details.


Five top tips to help you protect your identity


  1. Register with Secure Sentinel, or, if you're an existing customer, keep your details up to date

  2. Have a PIN on your phone. A password to access your keypad adds an extra layer of protection 

  3. As with credit cards or debit cards, make sure you keep your PIN/mobile password secure 

  4. Pay close attention to your accounts. And if you're using a phone, use an app that issues an immediate electronic receipt. That way you can check the amount of money you spend after each purchase.

  5. Report security and payment problems immediately. Your payment may be covered by the Electronic Fund Transfer Act, but the liability limits may depend on how fast you report the problem. 


So, are we sacrificing safety for simplicity? It would seem that the answer is no. If you do decide to embrace these technologies, then be savvy when it comes to protecting your identity. 


*Veda's Debt Study released in July 2012