Mastercard has started trials of online payments using the secure element in an NFC handset in France, and it looks like it could quickly become the standard way to buy stuff on the internet.
The trial involves 160 staff at ING Bank in Paris, who've been given Galaxy SIII handsets and a PayPass account to play with. When shopping online, via the web, they are offered the chance to authenticate using the phone. The phone then asks for a PIN and generates a cryptographic authentication, all of which takes place over the cellular network rather than the public internet as NFC Times reports.
The process sounds more complicated than it is, and needs to be compared to the existing system of sending credit card details over the internet. Today's systems not only expose the credit card numbers to malware running on the PC, but they also (generally) result in those details being shared with the retailer - so one's security becomes dependent on the security of that retailer and its staff.
Such transactions are known as "card not present" and the credit card companies charge a rate which reflects their propensity to fraud. The critical question now is if handset-secured payments will incur the lower "card present" charge, which would certainly result in very rapid adoption by retailers.
NFC Times asked the question, but no decision has yet been made. Mastercard and IMG are apparently still deciding if the technique is a goer before working out how much to charge for it.
Good security comes from paired tokens - generally one provided from your side and another recognisable one from a source you know and trust - with possession of only one being insufficient. Using a credit card on the internet proves almost nothing, while the passwords introduced by Verified By Visa and similar schemes introduce "something you know" they still lack the critical physical component.
Barclays PINSentry is a good example of how far banks will go to complete the pair: the physical card-reader posted out to every customer is now used to prove possession of the card (not just the numbers on the card) and knowledge of the PIN, increasing security enormously.
The secure element in an NFC phone can fulfil the same role, and one can easily imagine Verified By Visa being replaced with such a system, and proving very popular if the lower rates were charged. It might not be as sexy as paying for a frappuccino with a bonk of the phone, but if it can reduce internet fraud, then it could prove equally revolutionary. ®