Innovations and Payment Systems

Pay via cell phone with new Mastercard credit card tool


ViVOtech plans to put a Mastercard credit card application inside cell phones for tap-and-go payments.

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Consumers may already be using an RFID tag inside their key chain to pay for gas, allowing the credit card to remain in its spot in their wallet, while Mastercard holders have the ability to tap and go with a PayPass card.  Now, a company called ViVOtech is planning to give cellphones the ability for a similar method of rapid payment.

Following years of development, ViVOtech has started to forge deals with credit card companies and retail stores to enable purchases that do not require a credit card or even contact of any kind.  Instead, a wave of the cellphone is all that would be required for a transaction.

ViVOtech is very confident about the prospects for RFID, with the company’s president reporting that there have already been 20 million credit cards issued with RFID chips.  Those credit cards let consumers make purchases by waving or tapping their plastic by or on the card reader, no swiping necessary.

But according to ViVOtech, replacing a credit card with a cellphone has security advantages.

He explained to that in case of a cellphone loss, it would be easy to cancel the credit card.  While a lost wallet means the cardholder must phone each credit card issuer individually to make sure they are not held liable for any unauthorized charges, a call to the cellphone provider would mean that the phone and all the credit cards programmed into it get shut off in one step.

Of course, calling to have your credit card account closed might be tough if you are without a cellphone.

ViVOtech says that an RFID-cased credit card system provides greater safety than a traditional credit card with a magnetic strip due to the cost involved for thieves.  The encrypted computer chip on an RFID credit card features a card issuer key, which makes it impossible to copy the data contained in the chip.

Additionally, since it would cost half a million dollars to break the encryption for a credit card with a credit limit in the thousands of dollars, the cost to break in outweighs the benefits to a criminal.  Meanwhile, the 3-digit CVV number that usually appears on the back of a credit card would change with each use of the RFID phone, providing further security.

It seems that the guys at ViVOtech aren’t the only ones betting on cellphone as a tool for purchases.  In May 2006, market research firm ABI Research projected that half of cellphones would have some sort of contactless purchasing power by 2010.  ABI said that RFID credit cards merely represent an intermediate step on the contactless commerce growth curve.

With an RFID-enabled credit card phone, users would be able to store multiple credit cards.  At the point of sale, the consumer could then decide which credit card to use for their purchase.

If ViVOtech has its way, consumers will be able to make payments with a cellphone in a wide variety of places.  The company hopes to be in such locales as stadiums, taxis, and movie theaters.

ViVOtech says it has working agreements with most of the leading credit card issuing bank, and that it is working with Nokia (which is an investor in the company), as well as Motorola, Samsung, LG, and Sony- Ericsson — which all will have several models of phones with the RFID credit chip available by the end of 2007.

Currently, ViVOtech is involved in regional pilot programs around the U.S., testing credit cards with its RFID chip.  The company is aiming to go national in 2008, with the target of having multiple models of phones available by Christmas of that year for making purchases at many retail stores.

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