App Turns iPhone Into Credit Card
By: Brian O'Connell

To paraphrase Homer Simpson’s famed quote about doughnuts — is there anything that the iPhone can’t do? The newest addition to the iPhone’s arsenal is a killer app that turns the tech tool into a credit card.

The technology comes from three key players: Apple (Stock Quote: AAPL), a company called DeviceFidelity and Visa (Stock Quote: V). Structurally, the application comes bundled with two key pieces — a microSD card and a uniform iPhone case. When you want to use the iPhone as a credit card, you slip on the case, and slide the SD card into a slot in the iPhone case.

The application relies on Visa’s payWave software, a credit card scanning system that’s in use at most major U.S. retailers. All an iPhone user has to do is walk up to the register, wave the phone in front of the payWave reader, and pop in the card password to complete the purchase. The device works equally well if you want to buy a can of paint at a big box home store or a train ticket at an Amtrak kiosk.

Data is beginning to emerge showing that mobile payment technology is growing by leaps and bounds. According to Gartner Group, mobile payment transactions are expected to rise to about 4.5 billion in 2012 — that’s up from 850 million in 2009.

Yet not everyone is convinced that iPhone credit cards are a good idea. Forrester Research, in its CSO Security and Risk Blog, says that iPhone users shouldn’t be so trusting with their credit card information.

“Just because someone can create a website does not mean they understand payments,” Forrester says. "Add in questions about the security of the 3G network and proper WiFi configuration and security, and you could be creating the perfect recipe for massive credit card breaches.”

Technically, the iPhone app isn’t “swiped,” and In2Pay maintains that its technology offers “secure contactless capabilities.” In addition, it’s doubtful that image-conscious Apple would approve an application that offered interactive mobile transactions that weren’t secure.

But time will tell. For now, iPhone 3GS and iPhone 3G users can expect user trials to begin sometime this quarter, according to DeviceFidelity, with the card application going live later this year.

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