Today’s Vision of Tomorrow: iPhones Accepting Credit Cards

In Business Solutions, Payment Card Industry, Transaction Processing on November 16, 2010 at 5:08 am

Article By: KIT EATON


Last week we wrote about Twitter creator Jack Dorsey’s credit card-reading gizmo Square for the iPhone. It looks like it’s just the beginning, though: In the future you’re pretty likely to be paying for stuff at an iPhone cash register. And maybe with the iPhone itself.

VeriFone’s iPhone Peripheral Reads Cards Too…

VeriFone’s already a big name in point-of-sale (POS) electronics, having been in the game since 1981, so it’s perhaps no surprise that the company’s seen the benefits of leveraging the iPhone as a component in its systems. After all, the convenience and power of the iPhone’s processor, easy user interface and wireless and 3G connectivity is exactly what attracted Jack Dorsey to Square.

Last week the company revealed its PAYware Mobile system, and it does pretty much what you think it does: It’s a plug-in iPhone peripheral that includes a card reader and some encrypting hardware to add in some extra security, combined with a dedicated app that does all the data handshaking with VeriFone’s remote security/banking network gateway.

The hardware’s a little chunkier and more resilient than Square, wrapping around the iPhone and connecting to the app thanks to the improved peripheral handshaking in iPhone’s firmware 3.0. Plus it actually encrypts the data received from a buyer’s card stripe before sending it to the iPhone–meaning there’s a hardware-encoded layer of security that should prevent malicious coders from intercepting and misusing the data with a hacked iPhone app. The advantages for VeriFone are obvious: The hardware requires no charger base/battery/screen or wireless tech of its own, and can thus be made more cheaply. That’s a direct saving which the company can pass on to potentially new subscribers to its POS system–which it clearly hopes to attract in numbers, since the intention is to make “PAYware Mobile available wherever mobile phone accessories are sold.”

…And So Does Apple’s


Oddly enough, Apple’s recently revealed it’s getting into this game too. That’s because mobile POS systems work well with the business model for Apple Stores, with their wandering workers able to sell you off-the-shelf goods right where you’re standing. Until now they’ve used purpose-made gear from other manufacturers running Windows CE of all things, but Apple’s smart too: It’s got its own EasyPay system.

It’s cleverer than VeriFone’s, and actually is designed to work with iPod Touches that are wirelessly hooked up to the in-store network. As well as being a larger snap-on device than Square, it’s got a battery to boost the useful life of the device, and a small built-in laser barcode scanner, which makes it into a complete electronic funds transfer at point of sale/stock/inventory manager too.

Apple originally designed the EasyPay for use in Apple Stores exclusively. But after it was apparently “deluged” with requests, there are strong rumors the company is considering commercializing it.

Will Next Year’s iPhone Do RFID Credit Card Payments?

RFIDIt’s long been used in Japan, and has even been tested in Nokia phones in Finland. But most commentators say RFID credit card tech will never come to the US…or at least won’t do for ages, simply because of the inertia of the current system (which still relies on old magnetic-strip tech while the smarter money is on nifty chip and PIN designs), but RFID payments may come very quickly to the States via a disruptive tech. Which is, of course, what the iPhone is.

And there are a bunch of rumors from November that really support this thinking: Apple, they say, is looking at putting RFID capabilities into the next iPhone, and has even built prototypes. Radio Frequency Identification is just the broad tech of short-range wireless comms that makes contactless card door-entry systems and certain train ticketing systems work, with a super-slim antenna and tiny memory chip like those shown here. It’s got a wide range of possible uses, which does include contactless credit-card payments.

In other words, it really is looking like that in the near future you’ll be making some of your electronic credit card payments in stores via an Apple device. Possibly the very near future if some sort of revolution is kicked off. It’ll start with traditional credit card swipes and signatures–hopefully including the clever chip-PIN system for Europeans–and then might move on to wireless systems. Is this clever and convenient or tech-moving-too-fast scary?

  1. Both card schemes (Visa and MasterCard) mandate a printed receipt-neither Verfone or Apple, it seem,s is complying with this requirement. There are many scenarios where emailing a receipt is not practical/feasible. Are you giving your email address to a taxi driver? In Europe what about if the pin entry voids and you need to re-enter it – are you trusting your merchant to do that without first obtaining a void receipt?
    The schemes will have a field day with these solutions. The Aquriers will be charging back everything and its screaming out to the fraud/criminal community – come and get me!

  2. Thank you much for commenting. I don’t think that Apple should be held responsible for the processing mishaps set by Verifone in their innovative product. Receipts are very important as they serve as evidence for the cardholder. However, I feel that complying with every single rule set by Visa MC cannot always be possible. Dealing with fraud could be an unlikely bet if everything is documented with signatures, GPRS tracking, photographs, emails, among other pieces of information (e.g. finger print scanning, video/voice authorization, etc). I strongly think that a paperless track to credit card processing may become more accepted as payment technologies start going mobile, and individuals focus on going green to help the environment.

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