William Lumpkins and Martin Joyce explore the different mobile payment systems, including Google Wallet, Apple Pay and bitcoins, and conclude that NFC is the way forward to eliminate paper money and credit cards


Author: William Lumpkins, VP of Engineering, O&S Services; senior editor IEEE Consumer Electronics Magazine; IEEE Sensor Council Standards Chair; and IEEE System Man & Cybernetics Standards Chair
Co-author: Martin Joyce, electrical engineering student, NUI Galway

The exchanging of goods for a recognised symbol of value, i.e. currency, has occurred on our planet for tens of thousands of years. The concept has stayed the same: an object represents a set value that is exchanged for goods and services and it is then reused for other goods and services. The object’s value is set by the local or international level of a group of individuals, which set the value through a complex set of value or trust factors.

At one point, precious metals were used, such as gold and silver. We then progressed to paper money, which were specialised paper notes issued by a regulatory body, and then to cheques (paper notes which referenced a local bank) or credit cards (plastic cards with identifiers which represented banks or credit-issuing institutions and the individual borrower of the credit). The inherent problem still existed, however: if the paper money, cheque or credit card were lost, stolen or copied, that individual would lose the value or ‘net worth’ of their economic buying power.

Multiple ideas have been pursued to strengthen the security of exchanging of these trust-based tokens of material wealth. One idea that has been explored since the late 1960s (Roughly 1968) is the use of radio frequency identification (RFID).

RFID is simple in its use at a high level but, as with all things, it becomes more complex in the details of its implementation. Figure 1 shows a simple block diagram of a RFID system in operation.


Fig 1: Basic RFID system

As can be seen in Figure 1, a magnetic field is produced from a field generator. As the RFID tag enters the field, the tag’s corresponding antenna – which reacts to the field from the field generator – develops an electrical charge that powers ostensibly a small microprocessor. This may pass a key from the transponder, or just an identifier, back and forth. The RFID tag then sends information to RFID transponder, which can be used for location-based services or as a value token; i.e. mobile currency.

RFID for mobile payments

RFID has been used for many years for real-time, location-based services (RTLS), as well as for mobile payment in many forms. One early implementation of this was the ill-fated Fairchild e-commerce project of the mid-1980s. Fairchild Semiconductor, as well as Motorola, Texas Instruments, IBM and the now-defunct DEC, were experimenting with RFID-based monetary systems.

Fairchild issued press releases stating that paper money, cheques and credit cards could be consigned to the past by injecting a RFID sensor into the hand and linking it to an individual’s bank or credit institution. Figure 2 shows an example of this.


Fig 2: RFID being injected into a hand

Great idea, poor market research. Fairchild did not consider that fact that in the United States at the time, there had been a resurgence of ‘end-of-the-world fears’. Some fanatical religious groups touted the new technology as a sure indication of the end of times, as indicated in the Bible Revelations 13:16-18 “… a mark on his right hand or forehead, so that no one could buy or sell unless he had the mark…of the beast”. These groups very vocally squashed the idea and Fairchild decided against releasing a product at that time.

Interestingly enough, the patents were purchased by various companies and have been very successful as ‘pet tagging’ – inserting or embedded RFID tags into pets for enhanced security in case the pets are lost. Figure 3 shows an example of the marketing advertisements commonly found to promote such activities. Veterinarians and animal shelters now have scanners that can scan the identification chip and then contact the owner. Create an environment or the impression that the product is needed and consumers will buy it – love is a great motivator, as any sociologist or psychologist will tell you.


Fig 3: Pet tagging (photo: Denver Animal Shelter)

RFID has many names – for example, NFC or near-field communication. One could argue that RIFD is the physical embodiment of NFC and NFC is just the communication protocol. Either way, it tends to be used interchangeably among technologists. Arguably, RFID/NFC was developed in the United States as an ease-dropping device for the dark recesses of the US Government and then quickly morphed into e-commerce applications. But it did not go on to be used predominantly in North America.

The Japanese/Hong Kong marketplace widely deployed RFID/NFC use with the Sony Corporation’s FeliCa communication standard. FeliCa is rumoured to be reconfiguration of the Felicity Card first used in Hong Kong by Sony Corporation for the city’s mass transit system. FeliCa uses the underlying Antenna/Field Generator (Reader/Writer) of RFID; then it incorporated a proprietary communication protocol including encryption for use as a mobile payment system. This early version of FeliCa used 13.56 Mhz as the field frequency, with a communication rate of 212 or 424 kbps (Kilobits per second). Figure 4 shows one of the common uses of FeliCa card systems.


Fig 4: Student uses FeliCa with soda machine (photo: Zytronic Inc)

Near-field communication technology

NFC is derived from communication technology specified by the international standard ISO/IEC 18092 (NFCIP-1). After the establishment of NFCIP-1, NXP Semiconductors N.V. (former Philips Semiconductors), Nokia Corporation and Sony Corporation up founded an industry standardisation group called NFC Forum in March 2004. This Forum has developed a set of specifications that, in addition to NFCIP1, consider the compatibility with existing contactless IC cards. It has also set up a certification programme allowing device manufacturers to certify that their products conform to NFC Forum specifications.

In these specifications, the Type-A and Type-B communication technologies specified in the contactless IC card international standard ISO/IEC 14443 are called NFC-A and NFC-B respectively. The FeliCa communication technology, based on the Japanese Industrial Standard JIS X 6319.4, is called NFC-F. The NFC Forum develops specifications to realise global compatibility and equally handling these technologies.

Related to NFC, there is also the international standard ISO/IEC 21481(NFCIP-2). This standard covers NFCIP-1, ISO/IEC 14443 and ISO/IEC 15693. Although ISO/IEC 15693 uses the same frequency as the other standards, it is mainly applied to RFID tags used for products and logistics management. ISO/IEC 15693 is not included in the specifications defined by the NFC Forum at the moment.

An interesting social concern at the moment is that of a low minimum wage for fast-food workers around the world. There is general consensus that such wage levels are too low for workers to support a family. Thus, many fast-food companies are finding ways to automate many of the less-needed functions (such as order takers) that require human intervention, like payment systems, and only requiring human interaction with the creation of the food product. Figure 5 is a becoming a more common sight around the world.

Figure_6_Photo_couresty_of_O&S Services LLC

Fig 5: NFC-enabled kiosks for a Spanish fast-food company (photo: O&S Services LLC)

Of course, not only does this help alleviate the worker issue, it tends to reduce queues for the consumer and speeds up the entire process, so consumers can ‘consume faster’.


Fig 6: Paying with an NFC-enabled phone (photo: VendingMarketwatch.com)

As companies are able to ‘outsource’ more of the redundant employee base, they are able to increase the wages of the human workers and create both a socially viable economic structure as well as a profitable bottom line. Hopefully, robotic systems will not advance enough to replace volunteer writers – otherwise, I might find myself out of a job.

Google Wallet and Apple Pay

Google Wallet is a free digital wallet that securely stores your credit cards, debit cards, gift cards, loyalty cards, offers etc. With Google Wallet, you can shop in stores, buy online and send money. You can shop and save in stores by storing all of your gift cards, loyalty cards and offers on the Google Wallet app. You can also purchase in stores using the Google Wallet Card or NFC tap and pay if you have an NFC-enabled Android device.

You can use Google Wallet to buy on Google Play or other Google products, and on select Android apps and sites (wherever you see the ‘Buy with Google’ button). You can send or request money to anyone in the US with an email account through Gmail or the Google Wallet app. If they do not have a Google Wallet already, they can create one in order to send and receive money. In addition, you can track your online purchases, get shipping notifications and view detailed order history using the Google Wallet app. Google Wallet either exists on the user’s NFC-enabled Android device or as a separate NFC-encapsulated plastic card that looks like a credit card.


Fig 7: Google Wallet (photo: Google Inc)

As I do not have a NFC-enabled Android phone, just an Apple-based NFC phone, which Google does not support at the moment, I ordered a Google Wallet card. It is just like the one in Figure 7. Figure 8 shows the Google Wallet in action: in theory, like all NFC solutions, it is supposed to replace a consumers credit cards, although I am not sure that I am willing to cut up my credit cards anytime soon. There is still the issue of trust that always exists with new technology and payment systems.


Fig 8: Google Wallet in action (photo: ExtremeAction.com)

Another payment system that has come out is the Apple Pay mobile payment system. Apple Pay is designed to protect the user’s personal information. It does not collect any transaction information that can be traced back to a user and payment transactions are between the user, the merchant and the user’s bank. Apple does not collect your purchase history, so when you are shopping in a store or restaurant they do not know what you bought, where you bought it or how much you paid for it.

Actual card numbers are not stored on the device. Instead, a unique device account number is created, encrypted and stored in the secure element of the device. The device account number in the secure element is walled off from iOS and not backed up to iCloud®.

Apple Pay supports credit and debit cards from the three major payment networks: American Express, MasterCard and Visa. In addition to American Express, Bank of America, Capital One Bank, Chase, Citi, Wells Fargo and others, who announced support last September, more than 500 new banks from across the US have signed on to Apple Pay. Users can make purchases in stores and within apps, with credit cards issued by many of the leading banks nationwide, which make up 83 per cent of the credit-card purchase volume in the US.

Apple Pay in stores is fast and easy to use. Simply hold the iPhone near the contactless reader while keeping a finger on Touch ID (1).


Fig 9: Apple Pay (photo: Apple Inc)

Bitcoin development

Both Apple Pay and Google have the very real restriction that they are currently both US centric. This is mostly due to the fact that the level of security that the rest of the world requires for banking and credit-card transactions has oddly never been implemented in US systems. Both Apple and Google will need to beef up their encryption and security protocols to be able to operate in the worldwide arena, just as Japan/China has with Felica and the European Union has with the Smart Card ICs. One possible bridging mobile solution is an ‘outside the box’, financial e-payment system called bitcoin.

Bitcoin was first created in 2009 by a person or group of people that go by the pseudonym Satoshi Nakamoto. He/they continued working on it until mid-2010. The main development of the bitcoin core was then handed over to Gavin Andresen, who continues his work on it as chief scientist of the Bitcoin Foundation.

Bitcoin is a decentralised, peer-to-peer, digital form of transacting value. There will only ever be a finite amount of bitcoin, which makes it deflationary as a currency. It can be sent over the internet and, more recently, through SMS. There are no banks involved in the protocol. The network is run by people called ‘miners’, who act as banks or notaries, recording every transaction which is then stored publicly on the block chain securely, using complex cryptographic algorithms. The miners also take a small transaction fee for processing the transaction. To store bitcoin, one needs a digital wallet, several of which can be downloaded as an app to your mobile device.

To send a transaction, you enter the recipient’s address, the amount you want to send and simply click ‘send’. The end-user experience is quite simple. Bitcoin also has no borders. It can be sent from anywhere in the world to anyone who has a wallet. The transaction fee for sending bitcoin is usually only a few cents and sometimes free. Transactions are sent instantly, but take several minutes to be confirmed by the miners.

When using bitcoin, your mobile phone is your wallet. You can pay for things by simply flashing your phone off another device. You would never need to visit an ATM. You would never have to worry about having the exact change or breaking a note because your money is digital. There would be no more piles of small coins building up in your house because you will never receive change. The conventional wallet will become extinct.

Possibly, its biggest impact may be in developing countries. About three billion of the world’s population is unbanked and undocumented. Most people own phones though, which would allow them to be financially independent through bitcoin. It would significantly reduce the cost of remittances, saving people in developing countries billions of dollars. There is a company in Kenya, bitPesa, who is creating such services.

There are not many places where you can spend bitcoin today but the number of merchants accepting it is growing every day. A problem with using it as a currency is volatility. Wild price swings occur often, which deter people from using the network. Many merchants who accept bitcoin will exchange it with their local currency instantly.

Block-chain technology

Another interesting technology directly linked to bitcoin is the block chain. This is a transaction database shared by all nodes participating in a system based on the bitcoin protocol. These transactions are tamper resistant. A bitcoin does not have to just be a currency; it can be a representation of ownership. People can use bitcoin to sign a contract – for example, if you buy a car off from someone. They give you the key and within that key is a bitcoin, which represents ownership of the car. The car will not start unless the bitcoin, which will be in the key, is in the ignition.

It also allows for micropayments. Bitcoin can be divided into millionths of pieces. With this you could pay ten cents to read a news article instead of paying for whole monthly subscriptions. It also allows for peer-to-peer lending of money. A group of people could lend fractions of a loan to someone instead of relying on one central entity.

Hopefully, bitcoin – through NFC-enabled devices, Google Wallet/Apple Pay or FeliCa – will either standardise each other or win-out sooner rather than later. It is my belief that NFC is the way forward to eliminate paper currency and plastic credit cards; probably with the addition of tightened biometric security protocols like he P2410 Biometric Open Protocol Standard (2).

I can foresee a future where, with smart contact lenses, we no longer need to worry about being robbed or losing mobile payment systems, but can just enjoy life without the added stress that money can create. Perhaps I am a dreamer, but dreams are good.

William Lumpkins is the vice-president of engineering at O&S Services; senior editor at IEEE Consumer Electronics Magazine; IEEE Sensor Council Standards Chair; and IEEE System Man & Cybernetics Standards Chair. Martin Joyce is an electrical engineering student at NUI Galway. All comments are welcome. The author can be reached at xillis@ieee.org.

(1) http://www.apple.com/pr/library/2014/10/16Apple-Pay-Set-to-Transform-Mobile-Payments-Starting-October-20.html
(2) http://standards.ieee.org/develop/project/2410.html

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  Author: William Lumpkins, VP of Engineering, O&S Services; senior editor IEEE Consumer Electronics Magazine; IEEE Sensor Council Standards Chair; and IEEE System Man & Cybernetics Standards Chair Co-author: Martin Joyce, electrical engineering student, NUI Galway The exchanging of goods for a recognised symbol of value, i.e. currency, has occurred on our...