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The rise of debit cards nearly eliminated cash from most consumers' wallets. Now, mobile payments threaten to do the same to debit and credit cards. Making a purchase with your iPhone or Android phone has become far more than a novelty; it's becoming the future of payments.
There are already several forms of technology that allow vendors and merchants to accept credit card payments from conventional credit cards using their phones, such as Square and Paypal. But technology will now allow consumers to pay with their smartphones, too.
Just as magnetic strips revolutionized the use of credit and debit cards, near-field communication (NFC) and other technologies will help fuel the move to mobile payment technologies. More than 6 billion people now have access to mobile phones, and Visa has found that Americans are twice as likely to carry a smartphone as cash. Between 2012 and 2013, mobile payments doubled to $1 billion. It's predicted that mobile payments will top $58 billion by 2017.
Several major data breaches have been driving the replacement of standard magnetic strip credit cards with chip and PIN or EMV cards. As stores switch over to support EMV technology, the updates are likely to include NFC compatibility. Security is just one of the draws of mobile payment technology, which substitutes unchanging credit card numbers with single-use secure tokens. The technology also promises savings and convenience.
Here's a look at some of the best apps and technologies of the future that allow you to pay with your Phone.
Near Field Communications (NFC) : How Mobile Payments Work
Mobile payments in the United States and throughout Europe and Asia use technology called Near Field Communications (NFC), a form of short-distance wireless communications technology that allows you to transmit your payment information to a contact-less payment terminal (a touch-and-go device common at many retail locations) by waving the iPhone in front of the terminal.
You are probably already noticing these NFC contact-less terminals popping up everywhere, including fast food drive-throughs and gas station pumps. There are now many NFC platforms. Here are some of the most popular mobile payment systems you can use with your mobile phone.
MasterPass from Mastercard allows you to make payments from your digital wallet or a traditional credit card using NFC technology or QR codes. The MasterPass service lets you scan barcodes and buy things from your iPhone on the spot or pay at the checkout with your phone. It isn't an app but instead a service that retailers can add to their own apps.
Apple Pay is currently one of the most popular ways to use your iPhone's NFC feature, and one of the most widely accepted. You can use Apple Pay to do everything from making on-flight purchases on JetBlue flights to making purchases at a grocery store or gas station. In-store purchases are done with the phone's NFC chip, while app purchases are executed through your Apple TouchID fingerprint. Apple has partnered with virtually every major credit union, bank, credit, and debit card issuer, including Barclaycard, Capital One, Chase, Mastercard, US Bank, USAA, US Federal Credit Union, and Visa, with Discover support coming in fall 2015.
Right now, Apple Pay works with the iPhone 6 and iPhone 6 Plus, along with the iPad Air 2 and iPad mini 3, for in-app purchases. The iPhone 6 and the iPhone 6 Plus are the only iPhones equipped with the NFC technology.
Apple's greatest competitor is Google Wallet, which offers a similar service. When Google Wallet launched in 2011, it failed to gain much attention or use as most major wireless providers supported Softcard mobile wallet. In 2015, Google bought Softcard and Google Wallet is now pre-installed on Android devices from AT&T, T-Mobile, and Verizon.
Google Wallet allows you to store your cards on your Google account. When you wave your phone over an NFC machine, it identifies your card information linked with your account. When it was first introduced, it was only available for Android devices. Today, Google Wallet is available for iOS devices and it supports TouchID. While you can't pay for things with a fingerprint like you can with Apple Pay, you can choose to authenticate your log-in with your fingerprint instead of entering a PIN.
Other Ways to Pay With Your iPhone
NFC technology isn't the only way to use your iPhone to make payments. There's a whole host of apps that make it easy to split bills, pay friends, and spend your money without a card in hand.
PayPal has been the giant of online payments for more than 15 years, processing close to $300 million in payments every day. The PayPal app for the iPhone allows you to send money to friends or pay for things online. With a single touch, you can skip logging in and start shopping. All you need to do is take a picture of your credit or debit card to upload it to your digital wallet.
With the new PayPal app, you can even enjoy some bonuses when you pay at partner restaurants, stores, and service providers like Uber. For example, you can pay your restaurant bill on your iPhone with PayPal instead of waiting for the server to bring your check.
TabbedOut is a nifty mobile payment app that lets you pay for your restaurant checks and bar tabs. You can use the app to view your tab in real time at participating bars, add a tip, split the bill, and pay all directly from the app.
While Square became famous for its iPhone devices that allow merchants to accept cards with their phone, the company has moved even further into mobile payments with its Pay with Square app. With the app, you can walk up to the checkout and pay by giving your name. You can find Square-enabled merchants through the app, select "open a tab," then proceed to the checkout. The photo you link to your Square account will then appear on the merchant's iPad.
LevelUp is a unique approach on mobile payments. This free app lets you set up your credit card information by scanning a picture of your card or entering your info manually. When you want to pay a merchant, the app will display a unique QR code that the merchant can scan. There are currently 3,800 participating small businesses in the United States. While the system has some flaws, there are a few perks. LevelUp's main appeal is the loyalty program and discounts, which it says saves users $25 per month on average.
Venmo is a pay-by-text service that's mostly helpful for sending money to friends. All you need to do is enter your information into the Venmo app and confirm the text message you receive. You can connect with Facebook to view your friends and text cash.
This is just a small sample of the many ways you can now use your iPhone to pay for goods and services. One thing is definitely clear: the future of mobile payments is here.
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