We are now starting a series of postings on virtual payments.  However, this is different than making a mobile payment.  With this, you are actually entering in your credit card information to make a payment at online store.  But with a virtual payment, you are making payment with a mere tap of your iPhone or Samsung/Windows mobile device.  Here we go.

When it comes to making payments in Cyberspace, there are many terms that are associated with it.  The most commonly used ones are Virtual Payments, Virtual Currencies, Digital Wallets, Mobile Payments, etc.  But for the sake of this and future articles, the term “Mobile Wallet” will be used (as implied by the title).

But, it all comes down this common denominator:  When making a payment, there is often at least one, perhaps even two more intermediaries involved from when our financial information is first collected and then ultimately processed in order to make the payment.

A Mobile Wallet can be specifically defined as follows:

“A mobile wallet is a way to carry your credit card or debit card information in a digital form on your mobile device. Instead of using your physical plastic card to make purchases, you can pay with your smartphone, tablet, or smartwatch.” (SOURCE:  1).

So, rather than paying with your credit card directly (which in itself poses its own set of Security vulnerabilities), you can use your iPhone or Samsung/Windows Mobile device to make a payment.  As it can be seen from the definition, it is your Smartphone which contains and stores your financial information.

So, once you are ready to make payment, you just merely tap your Smartphone onto the Point of Sale Terminal.  However, in order to transmit your financial information over to it, a wireless Network Protocol known as “Near Field Communications” (also known as “NFC”) is used.

For example, there is a miniature NFC antennae in the Smartphone, as well as an NFC antennae at the terminal.  These two allow for a complete line of communication to occur.  But, it is important to keep in that although one of the primary advantages of Near Field Communications is that it can initiate and establish this line of communication very quickly, it is an unencrypted Wireless Protocol.

This simply means that your Credit Card information will be sent in a Cleartext format, and as a result, it can be very easily intercepted and read by a malicious third party even with a very basic Network Sniffer.  This will be examined in more detail in the next article.

In our next blog, we examine how to start the process in creating a Virtual Payment Platform.