Dr David “Doc” Eifrig (medical doctor but equally important with a phenomenal record when it comes to recommending companies to invest in) wrote an interesting article in February. He explained how the new currency is going to replace credit cards and why they are lot safer. Not only is Doc talking about this trend but so are Forbes. The 6 largest banks have all signed on. (Hmm, not sure that makes me feel better.) But when 220,000 US retailers have already agreed to accept this new payment including all the majors, I decided perhaps it was time for me to understand this.
Doc said digital currency is safer to use than your wallet. That got my attention because all I’m hearing is the horror stories about the lack of security. Safe and secure sounded like a pipe dream to me. Turns out I was wrong, yet again.
The technology behind digital currency is NFC-Near Field Communication. An NFC chip is a tiny transmitter. The chip is only activated when it receives a signal from another NFC device. The NFC devices have to be within inches of each other. The technology has been around since the 1990’s when it was used by military.
NFC technology means our wallets will be replaced by smart phones. Huge advantage: you can store all your credit and debit cards on a single smart-phone (and all your rewards cards and loyalty points.) No need to remember pin numbers or go to ATM’s.
My first concern was what happens when my smart phone is stolen or lost?
Here’s how it works securely:
-You password protect your smartphone. Thieves can’t use your card if they can’t unlock your phone.
-GPS-enabled smartphones can be tracked and recovered.
-NFC is secure because your phone does not carry your credit card numbers. NFC uses a unique digital representation or “token” for your credit card. (Called tokensization.) The only party that has your credit card number is the bank or institution that issued the credit card. Yep there is risk, if bank gets tapped like JP Morgan did last year.
-The unique digital code is only used once, so even if thief gets it, the code won’t be valid for another purchase.
Is this really being used? Think Starbucks. Their proprietary version of this generated $1.2 billion in sales in 2014. They are getting 6 million mobile payment transactions per week. Apple Pay also uses NFC. Apple Pay is already tied in with 90% of most used payment cards.
Now major credit card companies are mandating the use of NFC technology by Oct. 2015. (It’s referred to as EMV mandate. They are chip and pin terminals which process credit cards that don’t have traditional magnetic stripe card…the source of lot of security breaches.) “Chip and pin” uses data encryption combined with a 4-digit pin. This technology has been used in Europe and Canada for years. NFC and “Chip and Pin” technologies complement each other.
Are there possible pitfalls in the above? Yep, like what happens during a rolling brown out or simple power outage where you happen to be. What happens if major bank or credit card company has a breach in security, etc.
But think about that in comparison to having your wallet or purse swiped. You lose all your credit cards, drivers license, insurance cards, and for many their social security numbers. Now think of the mess in reconstructing all of that data and information.
Latest smart phones appear to be way to go.
At same time as we are having major advances in technology, people need to be planning for brown outs and other natural disasters that can disrupt all things that rely on electricity…and that’s virtually everything from gas pumps to running a septic system. There is more reason now, than ever to have food set aside to last a period of time, a source of fresh drinking water and water to use for other needs, have basic household products we use all the time set aside, have cash set aside (in case you can’t access your bank accounts), have first aid supplies, prescriptions, etc. While we all rely more and more on technology, there are many things technology can’t provide…especially if we can’t access that technology.