One of the defining features of the next generation of smartphones - which are starting to come out now - will be a technology called NFC (Near Field Communication). Instead of whipping out your wallet at a store, via NFC you'll simply tap or wave your phone to make a payment. This has major implications for banking institutions and the four main payment networks in the U.S.: Visa, MasterCard, American Express and Discover. All have been actively preparing for this sea change in how we pay for things.

NFC is a newer wireless technology that allows devices to communicate with each other over short distances. The data transfer between the devices occurs through one of two means: either a short wave or, as is more common, a touch or tap.

Some notable phones available now (or very soon) that offer NFC capabilities include the Google Nexus S, as well as the Samsung Galaxy II (select models), Nokia C7, Nokia C7-00 and the Samsung Wave 578. Wikipedia maintains a list here.

Payment Processing Network Companies

All of the major credit card companies have been busy rolling out NFC initiatives.

In May, Visa announced that it will launch a next-generation digital wallet service. The platform will allow consumers to create a digitized version of their actual wallet, in which they load all their cards, whether Visa or not. Even merchant loyalty cards will be supported.

Also this year, Visa teamed up with Samsung in order to bring NFC-enabled mobile payments to the London 2012 Olympics. With any NFC-capable phone, mobile users will be able to pay for purchases using only their phone at over 60,000 locations in London.

In April, we profiled the latest from Mastercard. They're working on SIM-based solutions, embedded solutions and the continued deployments of NFC tags.

American Express has a digital payments and commerce platform called Serve, which recently announced its first carrier deal since launching in March of this year. The company's new partnership with U.S. operator Sprint will allow Serve's mobile wallet application to be made available in the Sprint Zone for customers using select Android phones.

Mobile Banking

Banks are also ramping up for the mobile payments revolution.

At the end of March, we reported on a NFC mobile payments pilot program by Wells Fargo in San Francisco. The trial used Visa's In2Pay microSD solution. There are NFC-enabled mobile wallet services under development from other U.S. banks too - including Bank of America, Chase and U.S. Bank.

Square & The Startups

As well as the banks and credit card companies, startups like Square - the mobile payment solution founded by Twitter co-founder Jack Dorsey - have been making hay in the mobile payments sun this year.

Square provides a dongle-like device that you attach to your mobile phone in order to make payments. Unlike many of the other solutions we've discussed in this post, Square is not powered by NFC. This year, Square got an investment from Visa. Later, in May, it announced the Square Register. The aim with that is to make real world buying as easy as a one-click Internet purchase, a la Amazon or iTunes.

As of May, Square had shipped 500,000 card readers. It did one million transactions in May, to the tune of $3 million in processing per day. The company is on track to process $1 billion in transactions within a year.

Other products to watch in this space include Card.io (you pay by holding your credit card up to the phone), Zoosh (uses ultrasound instead of NFC!), Zong (acquired by eBay in June, it's a middleman connection between merchants and telephone companies), Payfone (which American Express invested in) and Sage (mobile payments for small businesses).

Carriers & Google

Operator-led mobile commerce initiative Isis is another mobile payments heavyweight. It has so far formed relationships with Visa, MasterCard, American Express and Discover. Isis is NFC-powered and will enable people to use their phones to pay for transactions at point-of-sale, just by tapping or waving their phone.

Finally, it wouldn't be a web-related battle if Google wasn't involved. Sure enough, the Google Wallet is "coming soon."

As you can see, it's a very busy space right now - possibly a bit too crowded. Let us know how you think it will shake out over the rest of 2011 and beyond.

When making a purchase on the Web, this new system offers a click-to-purchase functionality that does away with the long, tedious form filling currently necessary on the websites belonging to online merchants. Instead, a username and password will be all that's required to complete a purchase. Offline at retailers' locations, the mobile wallet will support the use of promo codes sent via SMS, barcode scanning and NFC technology, the latter which allows a customer to pay with a wave of their phone instead of with a swipe of a plastic card.

Visa introduced the magnetic stripe over 30 years ago, but now, that technology's time is coming to an end. There is a global movement underway involving the digitization of cash and checks, explains Jennifer Schulz, Head of Global Product Strategy Innovation & eCommerce at Visa. This mobile-driven force of change has come about due to the widespread ubiquity of mobile devices, and it has impacted the way merchants and retailers interact with each other.

While the mobile stripe has allowed for a convenience that consumers now take for granted, we now have the technology to replace it with something even better: a digital wallet.

The system that Visa is launching, includes three key pieces: an e-commerce offering, an m-commerce offering and an offline piece for point-of-sale transactions.

Online Shopping Revolution: No More Forms to Fill

Online shopping, whether done via a desktop computer or a mobile phone, will see the most radical impact in the short term. Currently, consumers wishing to make online purchases have to fill out long forms at each retailer's website in order to complete their transaction. In addition to filling out name and address (both billing and shipping), they also need to fill in their credit card number, expiration date and their card security code.

No longer will that be necessary.

In Visa's new system, the customer replicates their wallet online during a one-time setup and can then simply use a username and password to complete their transactions. The benefit to the consumer, obviously, is ease-of-use, but for the merchant, the benefit (besides these easier transactions for customers, of course) is that they'll no longer have to store customers' credit card information on their own servers. With Visa's digital wallet, the company is offering a global "card-on-file" system which retailers can tap into, leaving much of the security up to Visa.

What's NFC & How Will It Be Used at POS?

Offline, at the point-of-sale, the platform will take advantage of NFC technology. NFC, short for near field wireless communication, allows users to tap or wave their phone at an NFC-enabled terminal in order to pay for a transaction. NFC is now being built into modern smartphones including Google's Nexus S, Samsung's Galaxy II, Nokia's Astound and the BlackBerry Bold 9900/9930 devices, among others. Visa also offers cases and SD cards for non-NFC phones, in order to offer backwards compatibility to older devices. While still an emerging technology, it's expected that NFC will ultimately play a large role in the future of commerce.

Currently, there are 150,000 retailers in the U.S. with readers that accept NFC transactions, including big names like McDonald's, CVS and Foot Locker, to name a few. These readers, in some cases, may be branded as supporting Visa's PayWave, but any contactless reader will accept these sorts of tap-to-pay transactions thanks to the global standard agreed upon by the payments industry.

While the penetration of a large number of NFC terminals is still 3 to 5 years away, says Schulz, the environment is ramping up to embrace the technology more fully.

In the meantime, non-NFC equipped merchants can instead use Visa's platform to send promotions to customers via SMS technology, email or barcoded mobile coupons, which could then be shown to the merchant at the point-of-sale, or even printed out, if necessary. A recent example of this system launched in April in partnership with clothing retailer The Gap. The store offers real-time, location-based discounts to customers over SMS. The system knows when a customer is out shopping and where, thanks to the real-time processing capabilities of Visa's payment network. Those consumers are then sent an over-the-air mobile coupon for use at The Gap via text message.

Schulz, in describing the platform, wanted to make it clear that this sort of technology is opt-in only. "The consumer is at the center of the product," she explained. "They have to opt-in to any rewards, discounts, offers or other value-added features a merchant offers."

But Visa's digital wallet goes even further than that in its consumer-focused capabilities. Users can also access online controls that allow them to configure which cards are used for different types of transactions. For example, everyday purchases could be set to use your debit card by default, but travel-related purchases, like buying online airline tickets or paying hotel bills, for example, could be automatically configured to use your credit card.

Banks On Board

Financial institutions can also use the wallet to dole out rewards points and other offers to consumers as well. At present, Visa announced that it's working with the following financial institutions and organizations, with more to come: Barclaycard U.S., BB&T, Card Services for Credit Unions, ICBA Bancard, First Financial Bank of Ohio, Nordstrom fsb, Pentagon Federal Credit Union, PNC Bank, PSCU Financial Services, Regions Bank, Royal Bank of Canada, Scotiabank, TD Bank Group (U.S. and Canada) and U.S. Bank.

We also know that Visa was trialing its NFC-based PayWave service with Chase, Wells Fargo and Bank of America, too, so we would not be surprised to find those institutions on the list in the near future.

Launch Time Frame

The digital wallet platform will launch in the U.S. and Canada first, in fall 2011. It will then expand elsewhere in the world in the coming months. Also an important aspect to Visa's global ambitions is addressing the needs of emerging markets. Visa will work with financial institutions to serve the banked, under-banked and "bankless" customers in those regions. Here, a scaled-down version of the digital wallet will be present, allowing for transactions over SMS or through applications used on the SIM card, as made available through partners.

On modern smartphones, all the major mobile operating systems will be supported. "If consumers are using it, we'll make it available to them," Schulz says. On these platforms, mobile transactions, NFC and even digital, mobile coupons will be available.

There has been much talk about digital wallets and, specifically, mobile wallets in recent days, with everyone from Google to Apple and even the mobile operators themselves having been pegged as being involved in building a consumer-facing platform, in some form or another. Visa, however, will be one of the first to actually launch a system to end users, from what we know as of today. That, plus their brand name recognition and the openness of the platform itself, may give them the advantage in the race to become your mobile wallet of choice.

Visa released a new "best practices" for mobile payments April 27 and a stipulation of those practices are that credit card information be encrypted from the source of the transaction. Square does not currently encrypt credit card information coming from the dongle it uses to make transactions through smartphones. Yet, when billion-dollar behemoths that have just invested in your company strongly suggest that you do something, it is probably best that you do it. Hence, Square will issue new dongles later this year with the ability to encrypt data transmissions from the source.

Note: Updated with analysis from security expert Robert Vamosi of Mocana.

Update:
We contacted Mocana security analyst Robert Vamosi, a former tech journalist who has worked with Forbes and PC World who was quoted in Verifone's open letter for some insight.

"[Point-of-sale] terminals in retail settings don't encrypt at the moment the card is swiped, but there is a move right now within the industry toward point-to-point encryption," Vamosi said. "Encrypting the data from the moment it is read off the card until it reaches the card brand is the Holy Grail; no one's doing it, but many companies are attempting it."

Vamosi said the risk factors are of scammers getting between the reader (the "Square") and the application that processes it. In that scenario, "skimming" from the transaction, as Verifone said is the potential problem, would be feasible.

"The risk is in malware sitting between the dongle and the application. If malware writers target Square's input, then there's risk," Vamosi said. "If malware writers don't target them, then this is academic. But the payment industry is moving toward encrypting as much of the payment process as possible, so ultimately one could argue that it is inevitable that Square encrypts data in their dongle."

Vamosi uses the example of Albert Gonzalez, the mastermind behind the Heartland Payments System credit card breach of a few years ago as an example of the danger these types of malware could pose.

"Gonzalez and his crew were able to skim unencrypted credit card data from wireless POS terminals at TJX back in 2005," Vamosi said. "So the risk from unencrypted card data in motion across the network has been known, but it wasn't until the Heartland Payment Systems breach in 2009 that the payment industry got serious with encrypting as much card data as possible. It is not yet, however, a PCI requirement that card data in motion must be encrypted, only data at rest is explicitly covered by the latest PCI DSS."

Basically, in the chain of transaction from swiping the card to the data being stored, encryption is a growing though not mandatory practice, especially at the point of sale, where Square lives. Visa is moving the practice of encryption forward by instituting its best practices.

End update.

Yet, here we are, note quite two months later, and Square is going to start encrypting its dongles.

"Visa announced mobile security best practices. Square is excited to collaborate with Visa in helping define and shape the security guidelines for the rapidly evolving mobile acceptance space," wrote Square COO Jeff Rabois in a blog post. "The adoption of best practices will help increase trust in innovative payment solutions. Of course, Square complies with all current industry standards, and we are committed to meeting or exceeding industry guidelines as they evolve -- all while keeping our card reader free."

Nowhere in the post does Rabois mention the word "encryption." The closest mention is saying that they will adhere to best practices. The two primary points of Visa's mobile payment best practices was for encryption from the source and the ability to tokenize credit card numbers along the data chain.

Here is the pertinent bit from Visa's release:

"Encrypt all account data including at the card-reader level and in transmission between the acceptance device and the processor - especially important given the use of wireless or public networks."

It may be a moral setback for Square but, as they say, with great power comes great responsibility. If the company wants to keep reaching out to the big players in the payment industry they are going to have to play by their rules. Hence, if Visa wants encryption and has given Square a pile of money, encryption is what Visa will get.

Instead, the credit card company is experimenting with SMS text messages containing offers which are sent users who opt-in to the new program. In its initial phase, clothing retailer The Gap is Visa's only partner. Discounts are sent to consumers in predefined zip codes and demographics after qualifying transactions are made with their Visa cards.

The offer, in this case, would be for a deal at a nearby Gap location. If, in the future, more retailers signed up to participate, the offers could include deals from other qualifying merchants, too. At present, however, Visa has not detailed any expansion plans for the service.

The current program, called Gap Mobile 4 U, lets the retailer provide incentives to potential customers but also benefits banks by letting them offer value-added services customized to their customers, explains Jim McCarthy, Visa's Global Head of Products.

Gap's program has been in testing since November 2010, when early users signed up to receive offers from the Gap via a secure website, says Visa. The offers were then delivered to phones when the shopper met certain criteria, such as shopping at a merchant within a specified zip code, shopping at a specific merchant category type or spending a certain amount on a specific day or within a specific time frame.

To redeem these text-based coupons, customers only have to show their phone to an employee at The Gap during checkout.

Both Visa and The Gap are notable for having experimented in the deals spaces for some time. Most memorably, perhaps, was the time when The Gap gave away 10,000 pairs of free jeans to its customers in conjunction with Facebook's Deals launch back in November. Visa has also been experimenting with NFC alongside its banking partners Chase, Wells Fargo, U.S. Bank and Bank of America. NFC, or near field communication, is a short range wireless technology that allows customers to pay for purchases using only their mobile phones. It forms the backbone for the emerging mobile wallet systems, which will one day include coupons and discounts, in addition to processing transactions.

Users will be able to send or receive money from their Serve accounts, which can be funded by a bank account, debit or credit card, or by money from another Serve account. With the new AmEx digital payment system, consumers will be able to make payments via the Serve website, via their mobile phones, and with merchants who accept American Express cards. Accounts will be accessible via Android and iPhone apps and through Facebook.

According to American Express' Dan Schulman, "We intend to quickly evolve the Serve platform by adding new features and functionality as we learn from consumer and merchant experiences. To encourage a broad cross-section of people to experience the benefits and convenience of Serve, we are working with a range of partners to integrate Serve as a payment method and deliver customized offers, and we will waive most consumer fees for the next six months."

Wooing Customers Away from PayPal

The lack of fees might be a good way to lure new customers, but AmEx says those fees won't be high after that initial six month period. Customers will be charged for putting money into their Serve accounts - 2/9% plus a $0.30 per load - and will be charged for ATM cash withdrawals - $2 after one free withdrawal per month.

The move of both Visa and American Express to start offering these P2P online payments is a clear indication that credit card companies are recognizing that online payments are reshaping financial transactions. As both of these giants gun for what has long been PayPal's market, it will be interesting to watch if the competition makes things better for consumers, who will now have more choices in how they can send and receive money online.

Visa's announcement includes a partnership with CashEdge and Fiserv, two person-to-person financial transactions companies, which will now have access to VisaNet, the company's payment processing network.

Visa describes cash and check transactions as "inefficient" and indeed, there are many reasons why a move to offer this makes sense for Visa. Yet, despite Visa's leadership as a credit card processing company, it might have a difficult task ahead of it in unseating PayPal as many people's online financial transactor of choice. PayPal, after all, doesn't require you have any credit card, let alone a Visa.

4chan, the infamously crude message board, is currently down due to a distributed denial of service (DDoS) attack and has been since the early morning hours according to the site's Twitter account. The attack comes just a day after similar attacks slowed down Bank of America's Web services.

The 4chan status page lists several parts of the site as being up, but "Boards", "Post images" and "Static files" are all listed as down and the site barely loads after a minute or two. Even this, however, is changing over time with the intensity of the attacks. Geekosystem editor Robert Quigley ponders who could be behind the attack, asking if it could be Tumblr users still hanging on to the Tumblr/4chan battle of earlier this year. Quiqley goes on to wonder if it could be the banks themselves acting in retaliation or even 4chan itself.

It would be a move straight out of a movie to DDoS attack yourself, wouldn't it? What's the best way to prove your own innocence? Make yourself the victim.

We don't have any information on who is behind the attacks, but that would be some high drama right there. The safer bet, though, might be that supporters of the various sites that have been taken down by Anonymous are retaliating. We'll keep an eye out on 4chan's status page for an explanation.

The system makes it as easy as waving your payWave-enabled phone in front of a sensor, which then securely completes the transaction.

With this pilot program, those with payWave-enabled phones will be able to pay for New York City subway, PATH rail system and NJ Transit fares using their phones, along with fares for more than 10,000 New York City cabs.

Update: We failed to mention how Visa plans on allowing iPhone users to make these payments, as did Visa in its press release. According to our last article on the topic, iPhones will be fit with a special case that allows them to make payWave payments by including the memory card in the case.

Like Square, the new solution allows you to physically swipe credit cards while processing the transaction over an Internet-connected iPhone. But isn't toting around a physical plastic card soon going to be a thing of the past? Maybe, as makers of other new mobile payment solutions, including "contactless" technology and money-transfer apps, would have you believe. Then again, maybe not.

The Intuit solution offers a flat rate of $12.95 a month, plus 1.7-3.7% of each transaction and an additional $.30-$.40 per transaction fee. Square, on the other hand, will charge 2.75% plus a $.15-per-transaction fee. Intuit's biggest selling point, however, is its lack of long-term contracts.

NFC: Now Available, via a Sticker

Although what Intuit is offering is a brand-name and accessible solution for many small business owners, it may or may not be the next big revolution in mobile payment technology. At least, that's what another startup called Bling Nation hopes.

This company has partnered with another big name: PayPal, to push its "Bling Tag," an NFC-enabled sticker that can be stuck to the back of any mobile phone. (NFC, or "near field communication," is a short-range high frequency wireless communication technology which enables the exchange of data between devices over about a 4-inch distance.) In this case, the Bling Tag replaces a credit card, and to use it, you only have to tap your phone onto the merchant's "Blinger." The name sounds a little hokey to us, but the idea is solid.

The Blinger is provided to companies for free upon sign up, and set up is simple: You just plug it into an electrical outlet. Also, no integration with a POS system is required.

Processing costs vary depending on the volume of business a company does, but Bling Nation claims merchants could save up to 50% in processing fees, as compared with the large payment processors. Payments are tied to your account at a financial institution, and now, optionally at PayPal. The money is instantly debited from the associated account at the time of purchase.

Unfortunately, the Bling Tags are only available from financial institutions, which have to first sign up to support this technology. That alone will limit adoption, as will the fact that few merchants actually support the thing.

Other NFC News: Apple's Plans and Visa's Case

That may change in time, however, especially if Apple builds NFC tech into its next iPhone, as a new hire by the company - Benjamin Vigier, an expert in the field - seems to suggest.

Plus, the startup Bling Nation is only one example of companies looking towards an NFC-enabled future. This summer, Visa is beginning trials of its contactless payment technology, payWave, integrated into a special protective iPhone case, developed in partnership with DeviceFidelity. Using NFC on the back-end, consumers could simply wave their iPhone in front of a terminal. For what it's worth, the system is already catching on in Canada.

(For more on NFC, see: "NFC: Never Mind Credit Cards, Pay With Your Phone")

Mobile Payment Services, Apps

Then again, it's possible that neither NFC nor hardware attachments represent the future of mobile payments: it could be, simply, an app.

Last fall, we looked at several m-Commerce solutions, including Boku, Zong, Obopay, MasterCard's MoneySend and Nokia Money, to name a few. They aren't household names, at least here in the U.S., for several reasons, including limited availability, issues with usability and small user bases.

Even though big names like Amazon and Google are jumping into the mobile payments game, as well, (the former with a service for in-app and mobile website purchases and the latter with an even geekier solution - a combination of a browser extension and QR code) the technology hasn't yet truly caught on for brick-and-mortar merchant-to-consumer transactions.

Consumer Reports Warns of Mobile Payment Issues

Meanwhile, the respected organization Consumer Reports - the same group whose decision to "not recommend" the iPhone 4 due to antenna issues forced Apple to finally fess up and offer free bumpers - has recently warned consumers of mobile payment dangers.

With what seems to be a dire warning, Consumer Reports issued a press release: "Mobile Payment Systems Could Leave Consumers at Risk." At the crux of the problem with these new technologies, the report claims, are the varying protections for bank errors and unauthorized use. Debit cards only provide protections for bank errors and unauthorized use, not disputes with the merchant. The same goes for transactions where money is automatically deducted from a bank account. And payment services provided by mobile carriers might escape consumer protections entirely, unless a contract specifically provides them.

"Consumers should not be expected to figure out what protections apply to each competing new payments venture," said Michelle Jun, staff attorney for Consumers Union, the nonprofit publisher of Consumer Reports. "Now that mobile payment ventures are emerging in the U.S., it's time to harmonize and extend consumer protections for all payment services."

Ironically, this news release's intention is actually to push mobile payment companies to get up to speed with their credit card-swiping counterparts. (Consumers Union called on them to include "full consumer rights provided under existing federal law for both debit and credit cards," it reads. And to provide "true voluntary 'zero liability' assurance for consumers without loopholes.")

But sadly, in an age of headline-only journalism, the news will likely be taken in a more negative light. (As it will by those who have only skimmed this article, reading the section titles, sigh).

Who Will Win?

NFC has seen some success in parts of Europe and Asia, and mobile payments are par for the course in many parts of Africa, where access to banks is limited. But at the end of the day, it's too soon to know how well (or if) these technologies will take off in this part of the world, namely North America, and specifically, the U.S.

One disadvantage many startups have entering this space is brand-name recognition, or rather, the lack thereof. In Intuit's trials, for example, many customers trusted the product because they had heard of the company before. Faced with "Bling" stickers and apps that sound like games ("Boku," "Zong"), there may be adoption issues until there's a brand-name partnership underway.

The announcement comes at a time when the mobile-payments market has begun to heat up with competition between startups and large credit card providers. San Francisco-based startup Square has many people excited about its mobile application and dongle that allows credit cards to be scanned by various mobile devices; online payment staple PayPal recently teamed up with Bump Technologies to provide a mobile transaction service as well.

Visa also recently announced its own foray into the mobile payments market. Earlier this month, the MasterCard competitor teamed with DeviceFidelity to launch special cases for iPhones which would allow users to take advantage of Visa's wireless and contact-less payment method, Visa payWave, straight from their phones.

But mobile payments is just one of the platforms MasterCard hopes developers will innovate on using its technology. The company says it has identified 20 other areas in which their APIs could be used, including payroll systems, social networking applications, eWallets, and online games. With the growing popularity of sites like Blippy, which allows users to automatically share their credit card purchases with their friends, MasterCard may be providing a valuable API to developers at a ripe moment for these kinds of platforms and services.

Many have been skeptical about these new services due to apparent security risks that come from mobile payment systems, but MasterCard is taking precautions to make sure their platform is not abused. According to its press release this morning, "all developers will be approved and registered by MasterCard to ensure that MasterCard payment and data services continue to be used appropriately and productively."

The news comes by way of a leaked press release that temporarily appeared on MarketWatch, but has since been taken down. Several versions remain on the Web, however, thanks to Google's cache.

According to the release, the new Apple-certifed technology combines a protective iPhone case with a secure memory card that will host Visa's contactless payment application, Visa payWave.

PayWave, introduced in September 2007, allows cardholders to wave their card in front of terminals in order to pay for purchases at point-of-sale. The technology is similar to MasterCard's PayPass solution, which rolled out to select markets in 2005.

Visa's contactless technology already works at over 32,000 retailers from top brands, notes the company's corporate website, and the list is "rapidly growing," it says.

The iPhone-enabled payWave technology, too, will be made available at thousands of merchants, claims the release, including fast food restaurants, retail stores, in taxis, during sporting events (such as baseball games) and even at vending machines that have contactless payment terminals.

Beyond iPhone: Works on Any Phone with a Memory Card Slot

What's even better about this news is that the mobile payment technology won't be limited to iPhones. It will also work with "a majority of smart phones that have a slot for a memory card," which means that owners of other popular smartphones won't necessarily be out of luck. To use Visa's technology on non-iPhones, users can insert the card into their phone's memory slot to transform their phones into mobile payment devices.

Visa already released a similar technology in Malaysia and Japan. Last year, for example, the company teamed up with Nokia and Maybank, a leading financial institution in Malaysia, to offer Visa payWave on mobile devices. But at the time, the company claimed that several barriers to U.S. adoption still remained, many of which had to due with the limited adoption of NFC-enabled devices and terminals here in the U.S. (NFC, or near field communications, is a wireless communication technology that enables data exchanges between devices. The technology is popular overseas in Europe and Asia, but has yet to catch on with any real gusto in North America. PayWave uses NFC for mobile transactions.)

Apparently, Visa has found a workaround for the lack of NFC phones by embedding the computer chip needed into specially designed iPhone cases instead.

Is it Secure?

Considering that people often lose their mobile phones, the application has been designed so that it can be password-protected and uses "advanced security technology," says the release, to uniquely identify each transaction. If a phone was lost or stolen, the phone's owner would simply call their provider who could then immediately deactivate the account, the same as with lost or stolen credit cards.

Currently, the Visa Mobile Android application is available for select Chase Visa cardholders who use the T-Mobile G1 handset.

Are Mobile Financial Apps Safe?

As great as the Visa mobile app sounds, those over at Phandroid discovered something in the fine print that sounded a little troubling. Buried in the terms of service, there is a line that reads:

"...unfortunately, no data transmission via a mobile handset can be guaranteed to be 100% secure."

Of course, nothing is 100% secure these days - that's a given - but what does this mean for consumers using the application? Is Visa trying to cover themselves in case of any liability? That's the conclusion Phandroid come to. Visa is probably just trying to make sure that they aren't held responsible in case an error on T-Mobile's part leads to a data breach of some kind.

Still, it's interesting to read how the original press release about the application had an entirely different message. In it, there was a statement from Elizabeth Buse, Global Head of Product at Visa, where she noted that the mobile application "makes the consumer payment experience more convenient, more secure and more rewarding."

It's probably nothing to worry about, but the tone of concern in blog posts reminds us of the fears that people had when online shopping, banking, and bill pay services were first introduced. If you'll recall, there was an initial period of skepticism about the safety and security of performing financial transactions over the internet. The next frontier for fighting those same concerns may be mobile. Will consumers fear that mobile apps managing their financial data are insecure, too?

Making Mobile Mobile Secure

Consumers may have good reason to be hesitant though, and not because of Visa's pseudo-CYA line in their Terms of Service, but because mobile phones are often lost or stolen. If you're managing your financial data through mobile applications, there need to be some safeguards in place so that thieves can't access your credit card numbers and steal your identity just by snagging your phone.

We would also love to see remote backup and shutdown features built into applications such as these in the future which would allow you to quickly deactivate the app remotely in the event your phone goes missing. Even better, why aren't handsets manufacturers building these features into their phones? That would be a huge selling point for consumers when shopping for a new device.

It's not as if the technology doesn't exist. For example, at this year's DEMO conference, a startup called Maverick Mobile demonstrated a mobile security application that backs up your phone book and messages remotely in the event you lose your phone. It can also send activity reports via SMS as to what was happening with the handset - like if it was being registered to a new carrier and who that carrier was. It even let you remotely lock the phone or pester the thief with a loud alarm that couldn't be disabled without removing the battery.

We think more applications like that should be introduced to guarantee the safety and security of our mobile devices before we're hit with a ton of mobile apps for managing our finances. It would definitely make us feel more comfortable. Still, it's good to see innovation taking place when it comes to what these smartphones can do. An app like that from Visa means we're only one step away from actually being able to use our phones to make purchases...and that's really something to look forward to.