For years now, the promise of the mobile wallet and mobile payments has bubbled under the surface – technically innovative and exciting, but not yet accepted by the public. In a move that seeks to change this, Starbucks is partnering with Square, one of the more dynamic of the mobile payment companies. Square is just two years old. It was founded by Jack Dorsey, co-founder of Twitter. As part of the deal, Starbucks is investing $25m in Square, and its CEO Howard Shultz will join the Square board.
The attraction of mobile payments is not lost on merchants: ease and lower costs (Square provides both the app for paying and the subsequent payment processing at a fixed fee of 2.75%; although there are suspicions that Starbucks will get something lower); and great potential for future innovation. “Starbucks said it plans to roll out certain cutting-edge Square products,” reports Reuters, “including one that allows stores to use proximity sensors to pick up when a user carrying a smartphone loaded with Square's app has walked in the door. Clerks could accept payments simply by taking that user's name and charging their account.” But it seems that concerns over security, and possibly privacy, are slowing users’ acceptance.
The Starbucks/Square deal may begin to change this. “After years of false hopes and near misses the mobile payments market is finally hotting up,” said Alan Goode, founder and MD of mobile security specialists Goode Intelligence. “The recent announcement by Starbucks that they shall be investing $25m into Square and supporting the Square mPayments app in 7,000 coffee shops in the USA is another step towards the wider adoption of mobile payments,” he told Infosecurity.
Goode accepts that security questions have been raised. These include the loss or theft of devices, and a proximity-based version of drive-by downloading. And if vulnerabilities in mobile payment platforms are discovered and exploits developed, mobile devices will become an even more attractive target for thieves – “but this has not stopped over two million users accepting credit cards using the Square payment solution,” he added.
Mobile payments is becoming a major battleground for the mobile market. Android already has Google’s Wallet solution, “soon to be challenged by Apple’s upcoming Passbook wallet solution for iOS 6,” said Goode. It is clear that the big mobile vendors are gearing up for an expected payments market. Apple has an advantage over Google with its walled garden. It can enforce standard security features on all iOS devices in a way that Google cannot do for all Android devices. It’s possible, Goode told Infosecurity, that “Security concerns for mobile wallets and payment solutions may have lead Apple to reach into its vast pockets for the recent $356m acquisition of mobile security specialist AuthenTec and there is much speculation that AuthenTec’s fingerprint sensors could turn up in future generations of iPhones and iPads.”
The reality is that mobile wallets can be more secure than physical wallets. If a physical wallet or purse is stolen, the thief doesn’t need a password or fingerprint to open it. Nor can the real owner remotely wipe the cash it contains. The money is automatically lost – which is not the case with a mobile wallet.