Will that be cash, check or cell phone?

Mobile payments are the next frontier, but Americans are slow to adopt

By Vanessa Richardson

Daisy Chen has seen the future of credit cards -- and it's on the cell phone.

While on a trip to South Korea, Chen, a 24-year-old graphic designer from Sacramento, Calif., noticed how people whipped out cell phones when it came time to pay. One of her friends had a mobile phone from SK Telecom, South Korea's biggest mobile operator, that let her fill her commuter train account when it fell below a certain amount, and remotely send the charges to her Visa account. "She just held out her phone as we walked through the turnstile," said Chen. "I got spoiled. Now I want to do the same with my phone."

That's what credit card issuers want to hear from customers, and they're working hard on rolling out mobile payment technology to U.S. customers. However, compared to Europe and especially Asia, payment by cell phone here is still in its infancy. Analysts say it will take a while for card issuers to evaluate how well the technology works and whether consumers -- beyond hip youngsters like Chen -- will accept it.

Pay by phone: SMS or NFC?
There are two types of payment technologies used on cell phones. Short Message Service (SMS), or texting, allows a transaction by typing a dollar amount into your phone and sending it to the payee. With Near Field Communication (NFC), you swipe your phone like a credit card near a terminal. Both types use the phone's Internet browser to reach a remote Web server to approve payment.

NFC is used in "contactless cards," which many card issuers are introducing for use at special terminals in stores. The SK Telecom phone Chen's friend used for train tickets had Visa's payWave technology, used in contactless cards. But for now, NFC on cell phones is only being used in Asia.

SMS is seen as an easier technology in the United States because it works on all phone networks and doesn't require any special software to work. Visa is also focusing on SMS transactions, working with U.S. and Canadian banks such as PNC Bank, SunTrust and Wells Fargo on trials that let cardholders get text messages on their phones when they pay for something with a credit card.

The action is overseas
Visa is rolling out mobile payment pilot programs worldwide with SMS, NFC and more cutting-edge 3G and 4G phone networks. For example, employees of banks in Spain and Taiwan are using Nokia phones with payWave to pay at stores in major cities. There are also major pilots in Australia, Brazil, Guatemala and the United Kingdom.

In May 2008, MasterCard Canada did a four-month trial testing its PayPass contactless technology (which is currently used in the United States) in NFC phones on Bell Mobility's wireless networks.

So why is this technology being tested everywhere but here? There's simply no interest, says Edward Kountz, a Forrester Research analyst studying mobile payments. In a 2008 study, he found that just 6 percent of Internet users -- and only 10 percent of mobile device users --were interested in paying by phone.

Everyone is interested in mobile, but some are more interested than others ... So where you need more speed and convenience is where you may see the technology first.

-- Prakash Hariramani Visa

"The high availability of credit cards and online payment alternatives are commonly understood and accepted," he wrote. "But establishing awareness and trust around mobile payments increases the challenges of phone transactions. Compare that to markets like the Philippines, where many have embraced mobile as the first and only electronic alternative to cash payments."

Jane Cloninger, research director at financial services consultancy Edgar, Dunn & Co., says Asia's lifestyles make people there more apt to embrace mobile payment than Americans. "Those countries, with their dense housing and cities, have put more money into transit and wireless infrastructures, which has made cell phones more advanced and really helped spur adoption. It was seamless to use them first at train stations, then sandwich shops near the platform and so on. In the United States, we don't have the same density in our cities. It will take more than a PayPass-like application to spur adoption here."

There are a few U.S. companies working on mobile payments, both with card companies and on their own. Obopay lets you create a PayPal-type account to deposit money and download software onto your phone to make or receive payments with other Obopay customers. It currently has a mobile pilot program with Citibank.

Paymo lets subscribers in 50 countries use their phones to pay bills and buy in advance from merchants. Users enter their phone number to initiate the transaction and then confirm a purchase via text message. When the transaction is complete, it goes directly to their cell phone bill. MyTango has a pilot program in Northern California that allows phone users to do the same at a few merchants near Stanford University.

The next step: mobile banking
While mobile payments gain traction, card issuers are using an alternative method to get customers interested in making payments anytime, anywhere -- "mobile banking" programs that can be used on most cell phones.

For example, Bank of America Mobile Banking lets customers check balances on their credit card accounts, pay bills, transfer money between accounts and view transactions. It launched last October on the new Google Android phone system. An app for BlackBerry devices soon followed, launching in January.

American Express and Discover also offer mobile banking apps. You can get text alerts about when payments are due and received, balance updates and limits, membership points balances and irregular account activity. (Visa has the same, but it's currently only for Chase cardholders.)

With the iPhone craze, many banks, including Bank of America, Provident, USAA and Wells Fargo, have created mobile banking apps for Apple users to download for free.

A cell phone changes the way you interact with the world.

-- Farhan Ahmad Discover

For smaller banks with less of a tech budget, AT&T and cell phone maker Qualcomm created an iPhone application called Firethorn that lets their customers get the same access.

Prakash Hariramani, a manager for Visa's global product innovation, says these free apps are a good way for card issuers to gauge customers' interest. "It's a great way to get them snacking on financial services because NFC is not prevalent here yet. Once they get used to this, it will be a much easier adjustment when the NFC rollout arrives."

Until that happens, card issuers are doing more pilot programs in the United States that sidestep NFC. MasterCard has pilots for its Blaze Mobile sticker -- literally, a sticker containing its PayPass contactless technology. It can be put on any phone to make transactions at stores that accept PayPass. (Analysts say it's a good step, but the sticker is not as safe or secure as NFC).

MasterCard may be taking the biggest leap into mobile payments by launching a 21st century version of Western Union. Its MoneySend program, a partnership with Obopay that launched in May, offers person-to person money transfers via any cell phone in the United States. Sign up for a prepaid account online and you can use your credit card, debit card or bank account to transfer funds to anyone. (They also have to register to state where they want your money to be deposited.) Send a text confirmation to the recipient, then you'll get a call from MasterCard to enter a special PIN to verify the amount and the recipient. Currently, you can transfer anywhere between $1 and $500 for a small fee, although MasterCard expects some partner banks to waive that fee to get people interested. As with credit cards, you're not liable for any unauthorized charges.

Discover, which has done four small mobile pilot programs in the past two years, has a similar contactless sticker with its Zip technology, currently being tested by company employees. Farhan Ahmad, director of emerging payments for Discover, says there's no rush to get it to market. "We will slowly roll it out, but only where it's appropriate. We won't open it to those who may not take advantage of it."

What's the holdup?
Why are card issuers so reluctant about rollouts? It basically comes down to a chicken-or-egg problem, says Ahmad, who is candid about the multiple challenges in getting new technology to market. "First, you need a new type of card reader at the retailer. What technology do you use, and who pays for it? Second, how do all the different players come together, and what economic model will they use? Then there's a layer of complexity in user adoption because people use hundreds of different types of phones and applications. It's all very unclear, so we've been testing a lot of technologies to hash out the challenges and figure what works best."

Hariramani at Visa agrees there's no timeline for a NFC rollout, as phones with that technology aren't yet widespread in the United States, but he says Visa is actively talking with wireless carriers and banks about setting common standards. "Everyone is interested in mobile, but some are more interested than others, such as retailers in quick-service areas, like convenience stores. So where you need more speed and convenience is where you may see the technology first."

How long will that be? Tech analysts believe NFC mobile payments won't hit the United States until at least 2012. But with mobile banking fast gaining traction worldwide, it's inevitable that many Americans will eventually be switching from whipping out plastic to waving phones around at the train turnstile and store scanner.

Says Ahmad, "I think pay-by-phone will be adapted quickly because when someone loses his credit card, it may take a day before he realizes it. But if he loses his phone, he'll notice in about 20 minutes. A cell phone changes the way you interact with the world."

And it will soon change the way you spend your money.

6 times when it's OK to cut up your cards

By Erica Sandberg

Opening Credits

Erica Sandberg is a prominent personal finance authority and author of Expecting Money: The Essential Financial Plan for New and Growing Families. Ask a question. 'Opening Credits' stories

Dear Opening Credits,
When do credit cards get cut up? -- James

Dear James,
I love the brevity of your question! There are so many rules surrounding wise credit use that remembering them all can be like trying to recite the names of people you just met at a cocktail party. Here, then, are my top six easy-to-recall reasons to slice and dice a credit card.

1. You suspect identity theft. The moment you believe that someone else has accessed your credit account, get on the phone with your credit issuer and explain what happened. When you speak with the customer service representative (or "loss and theft" staff specialist, if there is one), you may be instructed to destroy the existing card and wait for a new one to be issued. Thieves can make purchases and wreak havoc quickly, so also file a report with the police department and contact all three credit bureaus to flag your files.
2. A soon-to-be-ex has access to it. Are you and your spouse splitting, but you have individual or joint credit accounts? This could be a problem. If he or she decides to take the cards on a shopping spree, you could be held responsible for at least half of the charges. This is especially important for couples in community property states, as both members of a marriage generally have equal rights to assets as well as liabilities. Therefore, if you suspect that the other person may go charging wild before the divorce or legal separation, confiscate and chop the cards, call your creditors to close or suspend use of the accounts.
3. You can't stop overcharging. If credit card debt is burning a hole in your bank account, and you truly can't control your charging habits, you may have an addiction issue to contend with. Not everyone has the ability to charge only what they can afford to repay. If this is the case, seriously consider calling Debtors Anonymous, and purge the temptation from your hands and pocketbook. When you can't keep your balances under control, cutting up the cards and bowing out of the entire system may make sense.
4. You have more cards than you need or can manage. Those "15 percent off today's purchases when you open a line of credit" offers can be enticing, but over time, you may have picked up a few too many cards. While maintaining accounts that you've had for many years and have a long and positive history with will help your credit rating, you may want to cull newer, unnecessary accounts. All that available credit can lead to high debt, and if you lose them, it can be be mighty difficult to remember which cards you had with you -- making reporting the loss a dangerous hardship.
5. The creditor is not to your liking. Sometimes a relationship just doesn't work out. You and the credit issuer may have been a bad match. Perhaps you were never fond of their policies, or you found their customer service or rewards programs lacking. Whatever the case, you are always free to say goodbye. Before doing so, however, let them know why you are dissatisfied. If you've been a good customer by always paying on time and keeping the balances low, they may do what it takes to make you happy. The advantage? You don't have to start fresh with a new company.
6. Your replacement card has arrived. Perhaps your credit issuer has reissued you a new card because the old numbers were compromised, or the bank no longer offers the same type of account you have and is switching you to another. What do you do with the one still in your wallet or handbag? Shred it. Creative thieves have a way of extracting key information from the numbers and information printed on even defunct cards. It's always best to lessen the possibility of having them fall into the wrong hands.

So James, this should provide you with a pretty good guide of when to begin card trimming. If another circumstance comes up that leaves you guessing, don't be afraid to contact your creditor and ask them as well. There's no reason to go scissor-mad if you don't have to.

Minnesota Attorney General files suit against arbitration firm

AG says debt dispute company favors credit card issuers

By Tyler Metzger

Minnesota Attorney General Lori Swanson filed a lawsuit Tuesday against the National Arbitration Forum of Minnesota. Swanson accuses the company, which handles disagreements between credit card issuers and cardholders, of deceiving consumers by hiding its ties to credit card companies and unfairly siding with them during disputes.

"This is a classic case of the little guy getting stepped on by fine-print contracts," Swanson said, according to a press release on her Web site.

Many credit card contracts contain a mandatory binding arbitration clause that eliminates the cardholder's right to sue the issuer. Instead, the consumer must resolve any dispute with a third-party, private arbitrator, such as the NAF, which is selected by a credit card company or other creditor.

The lawsuit claims the NAF, the largest arbitration company in the United States, violates state consumer fraud and deceptive trade laws by hiding its financial ties to collection agencies and credit card companies. The lawsuit also claims the company violates false advertising laws by misrepresenting themselves as a neutral organization.

"The company tells consumers, the public, courts and the government that it is independent and operates like an impartial court system," Swanson said. "In fact, it has extensive ties to the collection industry -- ties that it hides from the public."

The NAF said it is reviewing the documents and will release a statement later.

The same company came under fire in June of last year after San Francisco's City Attorney Dennis J. Herrera filed a lawsuit against it. Herrera claimed the company "decided in favor of the business entity and against the consumer 100 percent of the time." The lawsuit said the company ruled in favor of consumers in only 30 of the 18,075 credit card cases heard before arbitrators between January 2003 and March 2007.

According to a study by the consumer rights organization Public Citizen, 94 percent of cases administered by the NAF brought by MBNA, now owned by Bank of America, were decided against consumers.

The greatest gift of all: free travel

Gifting of flier miles is common and perfectly legal

By Randy Petersen

Cashing In

Randy Petersen is editor and publisher of Inside Flyer, which is considered the leading publication in the world about frequent traveler programs. At CreditCards.com, he writes Cashing In, a weekly feature in which he answers readers' questions about credit cards rewards programs. Ask a question.

Dear Cashing In,
My neighbor has tons of frequent flier miles as he travels for business. He recently offered to buy tickets for my family so we could take a vacation. Is this OK? Is it legal? How does that work? -- Linda

Dear Linda,
First of all, I hope there are some homes for sale in your neighborhood because it sounds like your neighbor and I could become friends real fast.

As unique as this may sound, it really is not that unusual for frequent fliers with "tons of frequent flier miles" to use them in ways similar to this. Travel is one of those gifts that almost all people love, and they continue to have a very high emotional and aspirational value, which is why when presented with opportunities like this, your family is likely to be incredibly grateful.

Let me reassure you, his offer is perfectly legal. All major flier programs in the world allow members to "gift" their awards to anyone of their choosing. There are almost 400,000 "mileage millionaires" in the world, and truthfully, there are many who do good deeds such as your neighbor. It sure beats getting a casserole, huh?

However, programs do have rules that prohibit the buying and sellling of rewards miles. An example of this would be where someone will offer up frequent flier miles in return for cash.

Here's how your neighbor's offer should work. He has to contact the airline to make the award reservations. Never accept information about your neighbor's frequent flier account in order to make your own reservations as it requires using his personal identification number or PIN to confirm the reservation to have the miles debited from his account. You never want to have access to his personal information in case there is ever any question. He can make the award reservations in any name, so just make sure you provide the proper names under which you'll be traveling.

You can also help with the reservation process by offering up a few flexible dates of travel -- usually one to two days on each side of a departure and a return -- to prevent him from having to communicate back and forth if the exact dates aren't available. Plus, you don't want to put your neighbor in the position of having to spend more miles on your travel than he has to if your exact requested travel date is not available. Trust me, while frequent fliers enjoy doing good things with our miles, we guard them very carefully.

Once he has confirmed the award reservations, an e-mail confirmation is sent and then you are on your own. Make sure the e-mail confirmation has the correct spelling of your names and the travel dates are what you requested. You might call the airline to request certain seat assignments, and if you need to change anything relative to your travel arrangements, try to do it directly with the airline. Be prepared to offer up your own credit card for any fees associated with changes. This is considered good manners for accepting a very fabulous gift.

If for some reason you are unable to actually take the trip, the proper thing to do is to let the neighbor know. He may be able to re-deposit the miles back into his account. Depending on his membership level, there is usually a cost for this. It is entirely appropriate for you to offer to pay that cost. Also, when you return from your trip, make sure you return the favor and bring a gift back for the neighbor -- it is how best neighbors continue to be best neighbors.

Finally, I would not repeat this offer to your other neighbors. Not knowing them, it could put ideas in their heads to ask about their free vacation. And we all know that would not be a very good idea for anyone.

Have a great time and congrats for being so neighborly. My guess is that you've done things in the past that are being remembered with this neighbor's generous offer.

Forza Motorsport 3 To Feature SUVs And Luxo-Barges

THE OCTOBER DEBUT of Forza Motorsport 3 for the XBOX 360 is drawing nearer, and this week comes the news that the game will feature not only a bevy of super and sports cars, but a range of SUVs and luxury sedans as well.

Publisher Turn 10 describes the selection as ‘Sport Luxury SUVs’ and ‘Sport Luxury Sedans and Coupes’, meaning we probably won’t see the Hyundai Santa Fe or the Toyota Prado, but the selection ought to be an appealing one (if you get sick of the range of true supercars on offer).

Turn 10 says that while SUVs and big luxury sedans aren’t known for their light weight and epic handling, the sheer muscle power of the cars listed below more than makes up for it, representing the publisher’s love for cars of all shapes and sizes.

In the Sport Luxury SUV category:

• 2009 BMW X5 4.8i
• 2008 Land Rover Range Rover Sport
• 2009 Audi Q7 V12 TDI
• 2009 Mercedes ML63 AMG
• 2008 Volkswagen Touareg R50 (pictured above)

In the Sport Luxury Sedan & Coupe category:

• 2009 BMW M5 E60
• 2009 Jaguar XKR-S
• 2009 Mercedes SL65 AMG Black Series
• 2009 Cadillac CTS-V
• 2008 Chrysler 300C SRT-8
• 2009 Pontiac G8 GXP

Aussie gamers will of course be pleased to see the inclusion of the Pontiac G8 GXP, derived from Holden’s own Commodore SS, giving locals another opportunity to pit a homegrown hero against the best the world has to offer.

Lutz Backtracks, Pontiac G8 Won’t Become Chevrolet Caprice After All

BARELY A WEEK ago, GM’s new product chief Bob Lutz was telling the world that the Pontiac G8 would be born again as a Chevrolet Caprice. Now, it appears that’s not the case.

Lutz has announced on his Fastlane Blog that the “G8 will not be a Caprice after all”, and that the idea of bringing back the Commodore-based vehicle to the USA had been scuttled due to the lack of a substantial business case.

“I’d mentioned it, and said we were studying it, giving it a serious look, because a car like the G8 was just too good to waste,” Lutz said.

“That’s all still true. But I have to say that, with my new “marketing” hat on, upon further review and careful study, we simply cannot make a business case for such a program.

“Not in today’s market, in this economy, and with fuel regulations what they are and will be.”

Lutz stressed that the ditching of the Caprice plan didn’t mean General Motors was giving up on rear-wheel-drive, but that prevailing market conditions and tightening emissions legislation made such vehicles difficult to justify.

He did, however, say that GM would be revisiting the RWD issue in the future.

“We have a tremendous RWD team in Australia that gave us the beloved G8, a team that we will tap into at some point again in the future for its expertise and sheet metal,” he said.

“Just not right now.”

Citroen C6 To Benefit From Diesel Hybrid Tech

CITROEN IS DEVELOPING an ultra-efficient version of its big C6 sedan, which thanks to the company’s diesel hybrid powertrain, will reportedly emit no more than 100g of CO2 per kilometre - a class-leading effort, if the French manufacturer is successful.

According to British magazine Autocar, sources inside Citroen say the diesel hybrid powertrain of the C6 will utilise the same layout as the Peugeot 3008 hybrid concept, unveiled at the Geneva Motor Show in March.

The hybrid powertrain of the Peugeot 3008 is a 121kW (163hp) 2.0 litre HDi four-cylinder turbo-diesel, mated to a 27kW (37hp) electric motor.

The transversely-mounted turbo-diesel, fitted with stop-start technology, drives the front wheels, while the electric motor lends its power to the rear wheels.

PSA promises a fuel economy for the 3008 hybrid of 4.1 l/100km, with CO2 emissions down to 109g/km - notably higher than the sub-100g/km figure Autocar has reported.

Similar to Volkswagen’s BlueMotion concepts, the C6 will likely benefit from additional aid in the form of an encased underbody and semi-enclosed rear wheels, along with low-rolling-resistance tyres.

2010 Hyundai Santa Fe Spotted Testing

THE FACE OF The 2010 Hyundai Santa Fe was unveiled to the South Korean press back in June, but so far only the one image has been offered by Hyundai.

These new spy photos offer a glimpse of the Santa Fe’s facelift, revealing the simple but stylish alterations Hyundai’s designers have brought to the company’s excellent SUV. (see TMR’s road test here)

It’s clear from these new photos that the main focus of the facelift has been to the fascia, with a sportier grille and more aggressive fog-light housings surrounding the bottom centre air intake, while the headlights appear unchanged.

The rear end has undergone the slightest of cosmetic changes, with the taillights now featuring a mostly chrome-effect appearance, similar to the previous generation Mazda6.

Further down, a sharper and more angled character line runs along the top of the restyled reflectors, while reshaped exhaust tips protrude from the untouched bottom skirting.

As expected, the 2010 Hyundai Santa Fe benefits from the addition of Hyundai’s new ‘R’ range of diesel engines, consisting of two four-cylinder engines weighing in at 2.0 and 2.2 litres, the first developing 137kW and 392Nm of torque, while the second produces 149kW and 436Nm of torque.

Both engines are paired with a new six-speed automatic transmission that Hyundai claims will improve fuel economy by more than 12 percent. Hyundai is only the third manufacturer in the world to develop its own six-speed automatic transaxle, with Toyota and a GM/Ford joint venture rounding out the trio.

The new transmission, which weighs in at 12kg lighter and with 62 fewer parts than the company’s current five-speed automatic, has been developed for transverse engine application in passenger vehicles.

Mercedes-Benz Lets Slip Technical Details Of All-Electric SLS AMG

JUST TWO DAYS AGO we brought you word that Mercedes-Benz was allegedly contemplating a battery-powered variant of the SLS AMG gullwing, but now the German automaker has not only confirmed the existence of the project, but released the first batch of technical details too.

The Mercedes-Benz SLS AMG with electric drive will be powered by four electric motors, arranged in pairs with two motors driving either the front or rear axle via a common gearbox.

Mercedes deliberately avoided using in-hub motors in an effort to reduce the unsprung weight of each wheel assembly, thus preserving the handling characteristics of the petrol-powered SLS.

The combined power of all four motors is a mighty 392kW and 880Nm - not far off the V8-powered SLS AMG’s 420kW. Power is supplied by a 400-volt bank of lithium-ion batteries, which are also topped up during driving by a regenerative braking system.

The heavy battery pack and electric motors have been mounted as low and as close to the centre of the car as possibly, and weight distribution is still fairly even. Despite being a completely different powertrain, the addition of an electric drive system did not require any modifications to the SLS’s all-alloy chassis.

“With the SLS AMG with electric drive, we wanted to redefine the super sports car,” said Volker Mornhinweg, CEO of Mercedes-AMG GmbH.

“For us, it is not just about [environmental] responsibility.

“We attach just as much importance to excitement and classic AMG performance.”

An introduction date for the SLS AMG with electric drive has not been announced, however present speculation says to expect the all-electric supercar to make its debut sometime in 2015 - four years after the introduction of its petrol-powered sibling.