Cellphone Providers Take Over as Providers of Online Payment Services

One even remembers when e-commerce and online payment services were all about buying on eBay with PayPal or with your credit card on Amazon. It did occur to people that it would be nice to pay with their phones, but it never seemed like it would amount to anything more than reading out your credit card number to a customer service representative who took your order over the phone. Today though, it’s finally happening. The app-enabled smartphone is finally emerging as a real way to move online payment services technology forward. Basically, using such a service will involve no reading out your credit card number, no phone dialing. It will just be a service that transmits value at the touch of a button. Still, paying with your phone, as convenient as it sounds, involves having the consumer make do without a few protections that he has taken for granted for a while now.

Online payment services processed by smartphone are called mobile commerce. And this isn’t some kind of future technology. Over the last year alone, Americans used their smartphones to buy $5 billion worth of stuff. Retailers like Amazon, Buy and Starbucks already do mobile payments. Why, quite a number of people used mobile commerce to pay for their Christmas purchases last year (although it was just about 1% of everything that people spent on their holiday purchases). How exactly does the whole mobile commerce thing work? Sometimes, it works like credit cards do; sometimes, they work by text message with retailers who accept orders this way. And sometimes, they work like gift cards – they display discount barcodes that can be scanned at the checkout (Starbucks is partial to this one). So whatever you buy with your smart phone, how do you end up actually paying for it? Sometimes, it gets billed to your credit card; at other times, it comes added to your cell phone bill.

One reason this isn’t good news for you is that if your purchases are routed to your cell phone company, that’s a kind of payment system that enjoys none of the protections that credit card payments do. If there is inaccurate billing, if you’ve receive defective merchandise or anything else, you can’t very well go and instruct the cell phone company to wthhold payment to the merchant. If there is a disputed charge, your cell phone company has no power to stop payment or to protect you. In addition, if you lose your phone, the one who finds it, if he happens to have the hacking skills to break into your phone, could rack up quite a bill buying stuff and even he could even clean out your bank account.

Mobile phones are already a target aimed for but plenty of pickpockets and other thieves. If your entire financial life were to be on your mobile phone as well, that could be a lot more thieves from now on who aim for this little object that gives them a great deal of access to your life. But when you think about it, wallets happen to be small and aimed for by thieves too.