Tuesday, December 12, 2023

Paying with your mobile phone - How does it work?

It seems like magic to me that it is possible for me to pay for stuff using my mobile phone.  I am not an expert in payment systems, but this blog post is my attempt to describe what happens behind the scenes to make this possible. Since I have an Android phone, I will describe how it works with Google Pay - I assume that the same principles apply to using Apple Pay if you have an iPhone. 

  1. The first step is to register all of your cards with Google Wallet. To make this easy Google Wallet allows you to simply take a picture of your credit/debit card(s) and it will save the card details without the need for you to type in the long card number manually. When you enter a card Google automatically communicates with your bank to ensure the card is valid and not reported stolen.
  2. When you are buying some goods or services, the merchant will type in the amount on their point of sale device.
  3. Assuming you are willing to pay the amount requested, you first need to pick which one of the stored cards you want to use for this transaction. With android, this is done by long pressing on the power on/off button and then swiping left and right to highlight the card you want. To make it easy for you, Google Wallet will display a small picture of what the original card looks like.
  4. Having activated your chosen card you hold your phone within 4cm of the POS terminal so they can use near field communication (NFC) to exchange details of your card. NFC is deliberately limited to only work at such short range to avoid accidentally paying for someone else's purchases.
  5. The POS terminal then checks with Visa/Mastercard who in turn contacts the banks which issued the card to verify that you are credit worthy.
  6. Occasionally the bank decides that they want to double check the identity of the person making the payment. If this happens, you will be asked to unlock your phone using a PIN code, unlock pattern or fingerprint reader. After this happens you need to return to step 4 above.
  7. When payment is successfully made, your phone will display a confirmation message with the last 4 digits of the card used (displaying the entire card number would be aa security weakness).
As I said, I am not an expert in payment systems. So if I got something wrong please let me know.

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