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How Cellular Electronic Payments Work

Safety Concerns with Cellular Electronic Payments

Image courtesy of VivoTechSecurity issues have been a primary concern of using cell phones for payment.
Image courtesy of VivoTechSecurity issues have been a primary concern of using cell phones for payment.
Image courtesy of VivoTech

One way of looking at cellular electronic payment is to think of your cell phone as an electronic wallet that eliminates the need to carry plastic credit cards. That might encourage you to keep better track of your phone, but how safe is each cellular payment transaction?

Proponents say these transactions are quite safe, noting that:


  • The card and reader need to nearly touch during the electronic payment transaction, so data can't be stolen from afar.
  • Transactions without identity verification are usually limited to small amounts, like $25 or less, so the reward for cyber thieves would be minimal.
  • Encryption keeps outsiders from capturing confidential data over the wireless connection.
  • The use of one-time transaction numbers can increase security.
  • NFC's "read-write" capabilities allow the payment station to request a personal identification number to check identity and then verify the PIN before proceeding with the transaction. And that offers an extra safety feature beyond what contactless RFID solutions can provide [source: Laptop].

Wireless carriers and mobile application developers are looking at ways to make cellular electronic payments even safer. Cellular South has experimented with biometric technology for its Wireless Wallet phone. A fingerprint scanner was used to verify identity, eliminating the need to remember a PIN or pass code [source: Cellular South].

Infineon Technologies, a German semiconductor manufacturer, has developed a high-security flash microcontroller that's integrated into the SIM card for an NFC-enabled cell phone. The microcontroller adds a firewall to protect financial information during transactions [source: Infineon].

The NFC Forum, a nonprofit industry association, also is working on the issues of security and privacy for cellular electronic payments. The forum's privacy advisory council was formed to address consumers' concerns.

Despite potential security concerns, many cell phone users who have taken part in pilot tests say they would like to continue using NFC-enabled phones to make cellular payments. More than 75 percent of the participants in Cellular South's three-month trial of the Wireless Wallet said they were satisfied with the payment transactions using the phone, for example, and 87 percent said they were interested in using the cell phone when it becomes available [source: Cellular South].

In New York City, 84 percent of the participants in AT&T, CitiGroup, MasterCard and Nokia's pilot study said they'd like to keep using the Nokia phones. So while it's uncertain how soon the Wireless Wallet and similar cell phones will reach store shelves, some customers will be waiting [source: Laptop].

For lots more information about cellular electronic payments and related topics, see the links below.

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More Great Links


  • Balaban, Dan. "Citi Exec Bullish on NYC, Lukewarm on Contractless Cards and Fobs." Card Technology. July 19, 2007.
  • Cellular South Wireless Wallet.
  • Choney, Susan. "Phone to speakers: Play tunes, and I mean now." MSNBC. April 23, 2008.
  • Ferenczi, Peter. "Would you like to make an electronic payment by cell phone?" Laptop. March 14, 2008.
  • Health, Nick. "Paper-free train tickets on track." June 4, 2008.,3800011842,39240482,00.htm
  • Juniper Research. "Mobile Payment Transaction Values for Digital and Physical Goods to Exceed $300bn Globally Within 5 Years, According to Juniper Research." July 1, 2008.
  • Kasavana, Michael. "Electronic payment technology evolves fast for consumers." Directory M.¬≠technology_evolves_fast_ for_consumers-a878467.html
  • NFC Forum.
  • Nokia Europe.
  • Swedberg, Claire. "McDonald's Japan Brings Discounts to Phones. " RFID Journal. June 2, 2008.