Rise of the Digital Wallets: Where Do We Draw The Line Between Security and Convenience?

Greater convenience and better security: these are the drivers behind innovations in mobile identity technologies, especially when it comes to mCommerce. Though it is a broad term that can encapsulate anything from online shopping done via tablet, to physical payments made with a smartphone, to a mobile wallet device that aggregates multiple payment methods into a single smart card, it is becoming apparent that simply addressing one of the two aforementioned drivers will not be enough to survive for the longer term in the mobile payment landscape.

The recent hype surrounding innovations in alternate methods in physical point of sale transactions contains quite a few legitimate reasons to get excited about the near future. In fact, thanks to this excitement and recent innovations in strong mobile authentication, financial experts agree that by the year 2020, at least 50 percent of US citizens will be using their smartphone as a regular, real life payment method.

With PayPal developing a technology that can leverage NFC capable smartphones to acts as at-customer point of sale devices, and its fellow FIDO Alliance board member MasterCard working on bringing its customers a physical payment app, there are some methods that have both convenience and security at the heart of what they mean for consumers. But not all of what will be released in the coming years will fit the secure and convenient model, choosing to go with the later rather than elevate both.

The PayPal and MasterCard solutions mentioned above are only two of the many methods of new school physical sale methods. Another that is gaining quite a bit of press is the mobile wallet technology. The idea with a mobile wallet begins with convenience: too many bank and credit cards in your pocket? Load them all onto a single card that can change function on demand. A single card for many accounts and in some cases ID cards and personal credentials.

Some mobile wallets, like the soon to be released COIN (now available for presale), leverage a connection with an associated smartphone on order to upload and manage cards, as well as acts as a proximity based security factor. Others, like the Wocket, which is currently being developed by NXT-ID, will work with its own proprietary device.

The demand for this kind of solution hinges on the idea that a traditional wallet that requires any number of physical cards is an inconvenience to carry and manage. This could very well be the case, as especially in the December holidays, bulky leather coin purses become common targets for seasonal shopping mall criminals. But an object that can pay for things is just that: an object, and unless it is secure in and of itself, then it all really comes down to a gimmick of size.

Thankfully, some vendors are aware of the two pronged attack that must be undertaken in the push for single-card solutions. SmartMetric recently partnered with Fingerprint Cards AB (FPC) in order to add a biometric factor to its One Card Digital Wallet solution. One Card needs to have a positive match on the cards embeds fingerprint sensor in order to activate, so even if it is stolen, the information contained within is protected.

The Wocket (slated for a 2014 release) is similar, collecting a voice biometric for access to the devices interface, only with a wearable technology spin. The Wocket is meant to literally replace a wallet and it functions, able to hold IDs, coupons, medical records and custom loyalty cards.

The COIN is a smart card managed via smartphone and at this time there are no biometric security factors involved. The card can be locked, unlocked and managed from a smartphone. The digital wallet payment solution deactivates the card if the associated phone is absent for a certain amount of time, but the feature can be turned off. It also has an alarm function that can notify the smartphone holder if fraudulent use is suspected.

The question facing consumers who will be left to chose between these and other alternative payment solutions, lest they need a wallet for their digital wallets, is where to draw the line with security when it comes to experiencing the added convenience of new technologies. On the other end of the equation, the question facing digital wallet providers is whether they are capable of securing the most important information belonging to their customers.