Security Fears Remain a High Hurdle for New Payments Technologies

Technology's great, but new payments platforms and systems will have to overcome consumers' security fears even if banks, processors, and technology vendors think such fears are overblown. That was one of the messages from the Federal Reserve Bank of Chicago's 2008 Payments Conference on Friday, a conference specifically devoted to security issues. One example is contactless cards, which U.S. issuers are pumping out in ever-greater numbers (Digital Transactions News, June 4). Bruce Cundiff, senior analyst at Javelin Strategy & Research and moderator of a conference panel, cited a September 2007 Javelin study in which consumers who indicated they were unlikely to use contactless cards were asked to pick up to three listed reasons to explain why. Some 65% picked, “I do not think it is a safe form of payment,” far ahead of the No. 2 reason, “contactless payments provide no benefits,” cited by 23% of respondents. Consumers have similar sentiments about mobile banking. In another 2007 survey, Pleasanton, Calif.-based Javelin asked 2,230 consumers to choose any of eight responses, some positive, some negative, and others neutral, about mobile banking. The most frequent response was “not sure,” cited by 34% of respondents, but just behind that at 33% was “this sounds too risky.” The next highest, at 16%, was “I would be willing to try it at least once.” Asked about their concerns over mobile banking, 69% said their personal information could be more easily obtained if their mobile phone was lost or stolen, and 62% said their account information could be compromised through hackers' spyware or viruses. “ID theft dominates consumers' mobile-banking concerns,” Cundiff said. Those fears about new technology persist even though ID theft has been steadily decreasing. Javelin projects 8.1 million Americans will be victims this year, down from an estimated 8.4 million in 2007 and 10.1 million in 2003. Even so, fears very often are grounded in reality. Another panelist, Kevin Fu, an assistant professor of computer science at the University of Massachusetts Amherst, told the attendees that a graduate student at the University of Virginia garnered some attention by dissolving the silicon of a transit system's chip card, after which he was able to decode the chip's algorithms. Fu also said that security systems based on open-source technology are proving to be more secure than proprietary systems that, once hacked, are highly vulnerable. “Watch out for proprietary technology; when it falls, it falls hard,” he said.