Way to Pay

New technologies make buying easier than ever. Cutting-edge advances in smart-card microchips and wireless solutions are giving consumers the option of leaving their cash and credit cards at home in favor of driver's licenses and cell phones.
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This story appears in the October 2007 issue of Entrepreneur. Subscribe »

Thanks to National Payment Card LLC, based in Boca Raton, Florida, the magnetic strip on the back of a driver's license can now double as an electronic personal check. National Payment Card currently offers its technology to businesses in 24 states. And this month, the GSM Association is piloting its Pay-Buy Mobile initiative, which uses Near Field Communication to allow consumers to pay with their cell phones. "After several fragmented initiatives, the mobile phone industry is now uniting around a single approach to enabling the mobile phone to be used at point of sale instead of cash or credit card," says Rob Conway, CEO of the GSM Association. Several GSM Association members, including Nokia, are deploying Pay-Buy Mobile, which builds on the specifications set by major credit card companies to ensure global interoperability between chip cards and point-of-sale terminals.

The new payment methods aren't just giving consumers a convenient way to pay--they're saving businesses money. Vendors benefit from electronic check payments through lower service fees--about 15 cents on the dollar instead of the 70 to 80 cents associated with traditional cards. And it's welcome relief: Credit card fees in the U.S. rose 22 percent last year to nearly $6.6 billion according to the National Association of Convenience Stores.

But consumers have two major concerns about the new technologies: increased financial risk from the loss of a driver's license or cell phone, and security from identity theft. Manufacturers are working on integrating biometric security features, like fingerprint verification, to hedge some of these risks.

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