Tap Versus Swipe

How has near-field communication (NFC) technology changed credit cards? We explain the principles behind NFC and its applications in the credit card industry.

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Episode Transcript

Speaker 1 (00:04):
Get in techt with Technology with text Stuff from stuff
works dot com. Hey everyone, and welcome to text Stuff.
I'm Jonathan Strickland and I'm Lauren, and today we're going
to talk about some more money matters. We had our
discussion about all of our currency, which was a lot
of fun, but it's not the only thing about money

(00:26):
in tech that really is an interesting subject that's come
up in discussion a lot, particularly in the United States recently. Oh,
certainly not. In fact, many ways that we exchange money
these days are really really technological. Yeah. In fact, uh,
the vast majority of the way money changes hands has
nothing to do with any sort of physical currency whatsoever. Yeah,

(00:46):
I never actually carry cash on me. But we've never
really talked on this show about how credit cards work. Yeah,
that's true. And uh, and so we actually put forth
that we're going to do an episode about smart cards
and smart technology and NFC and credit cards and asked
if anyone had any other questions. We did have response Chase,

(01:08):
our buddy, Chase said, be sure to talk about coin.
Don't worry, Chase, we got you covered. And you you
may be thinking, but what about traditional magnetic stripe cards?
And we are totally not talking about those today. Now, well, well,
well here, here's all you need to know. Okay, there's
information that's related to the credit card account you have
that's located on that magnetic stripe. You can have a

(01:29):
reader that reads that information when the stripe is pushed
past it that that actually has that little magnetic field
that can generate the information necessary for the processing of
the payment. But really we wanted to talk about some
of the more advanced technologies will probably at some point
go back and actually talk about the development of that
magnetic stripe tech because we were so dependent upon it

(01:51):
for so long. In fact, in the United States we're
still very heavily dependent upon it. And actually that's why
we wanted to do this episode about NFC technology because
in j Nuary of some forty million US Target customers
Target the brand the store, the store um had their
credit card information stolen during a hack. And in February
the news broke that Congress and the major credit card

(02:14):
companies here in the States are are finally in agreement
that America should move to these smart credit cards, which
I'm sure has the rest of the world just snickering
at us, because this is technology that exists in other
places and has existed in other places for decades. Yeah,
in fact, so much so that it's become part of

(02:34):
of just like the general UH language. I remember watching
this little tangent here, but I remember watching an episode
of that Mitchell and web Look, which is a comedy
sketch series from the over in the UK, and at
one point there is a comedy duo vaudeville team called
uh Fish and Chip and they're breaking up. That that's

(02:56):
their last names are Fish and Chip. That's adorable. But
Chip breaks up to go and join up with a
guy whose last name is Pen, so it's Chip and Pen.
I had no idea that that was a thing when
I saw this pen are. Yeah, I didn't know that
Chip and pen was. That was just that's the shorthand
for this technology of a chip that's inside a credit
card and a pen a personal identification number that you

(03:19):
used to fully fulfill a transaction. I didn't know that.
I just was like, oh, so you're going from an
established pairing of things to something unusual, And then as
the joke continue, like no, this must be a thing.
And again it just shows how in the United States
we're way behind on this technology. Yeah, so master Card
and Visa have both set themselves a deadline of October

(03:42):
to roll this technology out to their customers in the US.
But but, but let's let's go back a little bit.
What exactly are smart cards? Where does this NFC? What
what is NFC? Where does all this technology come from?
An excellent question. NFC stands for near field communication, which
we've talked about on this podcast before. But you know,
it's good to have a refresher. And near field communication

(04:03):
is just a type of short range radio transmission. It's
it's not in itself some sort of brand new technology
that we had never thought of. It's just a very
specific implementation of radio waves. Right, It's not like not
like some brand new weird energy that glows orange in
the dark or something. Right, And what's actually special about

(04:24):
it is that it's extremely short range, like like ten
centimeters or less. Yeah. Yeah, ten centimeters tends to be
what people say is the maximum transmission distance for most implementations.
I think technically it can go up to around twenty
centimeters depending upon how you build it into your technology.
But for the for the applications we're thinking about, ten
centimeters makes the most sense, because you're actually talking about

(04:47):
exchanging information between two very small devices that can be
brought into proximity with one another. So it's not the
sort of thing you want to be able to broadcast
across a country, let alone a room, certainly, which you
is why usually we don't talk about very short distances
being special in technology, but but this is, this is
one of those rare occasions. And uh, it's it's also

(05:08):
good for transmitting small amounts of information. Yeah, it's not
designed to move lots of data very quickly. In fact,
the maximum speed, depending again upon the implementation, is around
a hundred six kilabits per second up to four four
killa bits per second. The killa bits per second, that's
that's not a lot right in the grand scheme of things.

(05:30):
If you had taught me back in the Apple two
E days, I would have thought, wow, that was fat.
You can move everything I've ever written in just a
couple of seconds. But these days, that's that's super slow.
I mean, we're talking now about people getting fiber where
they get a gigabit per second download. That's I don't
even understand what that means right now. Right now, that
just seems like a dream, although Google Fiber possibly coming

(05:52):
to Atlanta, uh and totally different podcasts. But anyway, Yes,
so NFC really suited for this the small amount of data,
small number of packets going between chips and uh there
are lots of different implementations of that as well. Right. Okay,
So so we mentioned that this is all sent via
a radio frequency. What frequency is that? Thirteen point fifty

(06:14):
six mega hurts Okay. Um. It was chosen specifically for
its suitability for for inductive coupling, which we'll get into
in a second here. But it's basically the technology that
makes all of this work. Um. And it's also pretty
resistant to environmental interference and human tissue does not readily
absorb it. Yeah, these are all very important things if
you're talking about a technology that's going to be around people. Yeah,

(06:37):
Like we're talking about stuff that could be either that
credit card that we're going to talk about eventually, or
even a smartphone where you have a virtual credit card
stored on another device. Plus, this idea of the resistance
to environmental interference really important. If you're talking again about
something that's going to be used frequently. You don't want,
you know, if there's some sort of weird stormy weather

(06:58):
outside and suddenly you can't process payments. If you're an
umbrella store, that's bad news. That's very bad news. That's
a terrible business model. Yes, you should have gone with
some other payment plan. Okay. So so technically this is
an extension of r f I D technology, which is
why you might have sometimes heard uh, n f C

(07:19):
and r f I D being kind of equated colloquially. Yeah,
it's it's similar in r f I D stands for
radio frequency identification, So it's it's kind of like if
you've ever had one of those um those security badges
that you then hold up to a reader that when
it detects the security badge, it will unlock the door
for you so you can continue in. Most of those

(07:40):
badges are using r f I D rather than NFC technology,
although technically they could use either. I mean, some of
them probably do use n f C. It depends on
it depends on how much money and what exactly you
want to do with this kind of thing. But but
both of these technologies when you really get down to it.
Our applications of that inductive coupling stuff that we were
talking about just a minute ago um. And that's the

(08:03):
property of flowing electrons and magnetic fields to influence each
other um, meaning that when electrons flow through a conductive material,
they create a magnetic field. And conversely, and existing magnetic
field can create a flow of electrons in a conductive
material exactly as long as you've got a fluctuating magnetic field,
because otherwise, if you or or in this case, you're

(08:23):
talking about bringing something within the proximity of a magnetic
field that will cause electrons to flow. The important thing
is if you want to make that last like you
want to, and it's something that's going to be a
magnetic field that continues to induce electricity, it has to
be a fluctuating magnetic field, otherwise it'll just it will
induce electricity originally at first, and then everything kind of

(08:45):
balances out. So the same sort of thing with alternating current.
Actually alternating current is necessary to create that magnetic field
because or at least a fluctuating one, because otherwise balances
And yeah, you just get something that's equivalent to a
bar magnet, which would be useful for a moment and
then not useful anymore. Right, we know all of this
thanks to Michael Faraday's work way back in the eighteen thirties.

(09:08):
So this is not new technology technically, no, But I
should point out that Michael Faraday made all of his
purchases in cash, so just made that up alright, So yeah,
r F I D. Originally we're talking about a passive system, right,
It's not something that's actively communicating between two entities. So
in other words, you really had something that was kind

(09:30):
of like a detector, and then if the right sort
of chip came into the the field of the detector,
everything's cool. But you're not getting like an exchange of information, right,
And what's going on there is that if you've got
a chip in something um and by by passing that's
something near a reader that generates a magnetic field, you're

(09:50):
inducing the flow of electricity in the chip, thus creating
a pneumatic magnetic field which the reader can then pick up. Right.
So this is pretty simple stuff. I mean, it's not
like the chip inside whatever it is, whether it's a
key fob or a card or whatever, it's not itself,
uh connected to any sort of battery. It only gets
that electricity when it comes into contact with that magnetic

(10:12):
field of the reader. So, uh that you know that's passive.
It means that there's not an active amount of electricity
going through that chip. However, there are also active versions
of r F I D. Yeah, if you power that chip,
it will allow you to to a to extend the
chip to reader distance and also to store some information
on the chip for the reader to find. Right, So
in this case we're talking about something more advanced than

(10:34):
just a key in a lock. Now we've got something
where you could theoretically have information stored on that r
F I D chip. That is very important to allow
you to do some form of transaction, whether it's monetary
or otherwise. Right. NFC uses this same technology, but it
allows for for data transfer both ways, and basically does

(10:56):
this by letting the chip and the reader both have
the capacity to act as the active or the passive
partner in the transaction and they kind of switch roles
or flip flop back and forth in order to complete
any given transaction. And this is what really makes that
NFC ability. Like using it in the in the sense
of a payment makes it really useful because not only

(11:18):
can it allow you to pay for something, you can
have this ongoing relationship between an app on either a
credit card or in your phone or whatever whatever implementation,
there can be this ongoing communication that allows you to
do other things besides just make a payment, like apply
bonuses that you may have accrued by being a frequent

(11:38):
shopper at a particular place you know, or really carefully
encrypt a payment. Yes, and that will be really important
for us to talk about when we get into the
at least the perceived drawbacks of NFC. So we're talking
about lots you know this. This is just kind of
a platform, right, This is just a way of transmitting information. Again,

(11:59):
it doesn't necessary early mean that it's just paying. It
can be practically anything. And in fact, one of the
examples that I would hear all the time when I
was first hearing about NFC being incorporated into cell phones,
so that you would have an NFC chip in a
cell phone that you could bring to cell phones together
and exchange an electronic business card. So that way, if
I'm at a conference and everyone happens to have these phones,

(12:21):
we can meet with one another and do this quick exchange,
so I now have their contact information. I don't have
to keep up with lots of physical paper cards that ultimately,
you know, you're going to the washers or they're going
to go into a dusk drawer or into the garbage.
I mean, it's just you know, that's that's the thing.
So that was one example, but there are a lot

(12:42):
of other ones too, Like, for example, maybe maybe Lauren
and I both have UH music players electronic music players
that have these this NFC technology in it, I might
be able to do. You know, Lauren's listening to some
music that I think sounds interesting, but I'm not familiar
with it, and then just by tapping the phones, she
can give me the information where I have access to
that same sort of music. This would never actually happen

(13:04):
because also the fact that Lauren and I listened to
totally different types of music, and so I would never
ever think anything she listened to was interesting and vice versa. Clearly. Yeah,
you know, I mean, come on, I like Tibetan throat
screen singing. It's just it's that's my thing. I've never
listened to Tibetan thrash metal, but that's that's interesting, okay, Um,

(13:26):
all right, And so if you're thinking that all of
this UH near field communications r F I D stuff
sounds a lot like that Bluetooth low energy beacon stuff
that we were talking about in a recent episode. It's
it's kind of similar, but it's different in a couple
of ways. First of all, NFC and r F I
d uh with with those things, the device that contains

(13:48):
the chip has to be a lot closer to the
reader than with Bluetooth low energy. Right, Bluetooth you've got
like a maximum range of fifty meters, which, if you
do the math, is significantly greater than ten centimeters. It's
significantly You're indeed correct. And secondly, each chip and reader
can only interact with one thing at a time. That is,

(14:09):
once a transaction is started with a chip, the reader
will communicate only with that chip, and the chip only
with that reader until the transaction is complete. So NFC
isn't good for broadcasting to multiple multiple devices the way
that Bluetooth blow energy is. But this actually, in my opinion,
makes it more ideal for the kind of things like
payment process. It's more secure. Yeah, you know that you're

(14:31):
not accidentally paying for someone else's purchase, or you know
there's that things aren't getting yeah, if everything is set
up correctly, right, right, like First of all, the range
is so short that it's not likely that some let's
say it's a store that has multiple cash registers, unless
those cash registers are really close together and and those
reading devices are you know, practically next to each other,

(14:51):
which can create problems of multiplying the field and getting
everything kind of confused. Yeah, that that would be a problem,
but you know, it's fairly easy to solve. For one thing,
it's not likely that you're gonna have two devices within uh,
you know, having that ten centimeter overlap radius overlap. But
for another, because it has this one on one communication

(15:11):
and blocks everything else out, you don't have to necessarily
worry about their being interference from other ways either, like
someone taking out their their smartphone that has the same
sort of technology to make their purchase in their next
to you, but because of the arc of their hand
it comes into contact with that field. It really reduces
those those, um, those worst case scenarios quite a bit.

(15:36):
So let's talk about actual NFC credit cards. Now, again,
this is one of those things where in some countries
this is ah, this has been looked into for a while,
But let's let's talk about specifically the United States because one,
we lived there, and too, there's this new initiative for
the US to kind of move to this smart credit
card technology and to explain to our our U S

(15:58):
listeners what the big deal, while again all of our
friends over in Europe and Asia chuckle to themselves. Sure,
because France was really the first country to adopt the
technology for for payment related purposes. That was like what
like to three years ago in Night four? Whoa, okay, alright,
nineteen eighty four, the year after Return of the Jedi

(16:20):
came out, and they furthermore, are you sure that wasn't
two eighty three? They all came out three years apart. Sorry,
I didn't mean to question you. Um. Furthermore, France had
widespread chip based credit and debit systems by nineteen two,
So so we're we're technically really only fourteen or known.

(16:42):
That's twenty four years behind, not thirty something years. But
well that's that's something right. So again, it's it's it's
not that the United States hasn't tried this kind of
stuff out, or that we don't have companies that are
working on building this technology into their credit cards. It's
just that we don't necessarily see it spread out widely

(17:04):
across our entire infrastructure. Right. Uh sure. Side note, I'm
not sure if I actually said numbers correctly. I really
can't subtract on the fly, so if if you need
to write it and correct me on that one. But
but okay, So anyway, the US has indeed seen applications
of this technology before. It's not completely new, like Jonathan
was just saying, circa seven mobile, the the Gasoline Petroleum Company,

(17:27):
debuted a station credit card system that used an r
F I D key chain to access the user's account,
and then in two thousand five, JP Morgan Chase introduced
a card a credit card UH with a proprietary r
F I D system called blink right, and then Visa
and master Card have both been looking into it as well.
Moving into the two thousand's, we've seen that technology come up,

(17:50):
but again, not so useful if if you were kind
of a homebody. Right. Well, the problem is that this
technology is terrific, but it only works if stores are
set up with the infrastructure to allow you to use it.
So although they were pretty great for Americans who traveled
to other countries, there weren't that many places that you
could use them in the US, and in fact, I

(18:12):
know that there are tourists who come to the United
States who are used to this system and back in
Europe or back in Asia who then I wonder why
you have to take their credit card in order to
make a payment at say a restaurant or you know,
they the whole swiping thing is one of those things
that oh, how how how quaint and insecure. But we'll

(18:33):
get into that too, but yeah, it was. It's one
of those things where I know there are people who
come over to the United States are kind of I mean,
the US has this this at least this reputation of
being really technologically advanced and forward thinking and all of
those kind of things, but when you get to certain industries,
we really lag behind. In fact, we lag behind in

(18:53):
a lot of ways. But but you know, within within
the United States, we don't we don't tend to think
that way because we're kind of insulated and we aren't
living in this own little tech tech bubble where we
think we've got all the best stuff. Guys, we don't
have the best stuff. We do not we had the
best stuff in a long time. Merchants and credit card
companies both have cited the cost of the infrastructure, and

(19:17):
also the public's lack of understanding of the technology as
barriers to making all of this widespread. Yeah, ignorance and
expense the two big barriers, and in fact that ignorance problem.
I mean, it sounds like it's something simple that you
just do a couple of little p s A s
and people understand how the technology works, but never underestimate
how we will allow ignorance to play into our major

(19:40):
policy decisions. If you want an example of that, just
take a look at how well the metric system was
implemented in the United States. It's it's understandable, and maybe
not about the metric systems, but it's it's understandable about
about business decisions that are going to potentially cost you
a lot of money. Like I can see why why
companies would be a little bit shy about enacting some
thing that they don't think is going to make them money.

(20:02):
And in fact, now we'll get into why one of
the big reasons why why merchants in particular might be reluctant,
and part of that is that although NFC itself is
a standard right, that's a standard form of radio transmission.
So the basic technology upon which information is flowing is
going to remain the same from one implementing one implementation

(20:23):
to another. The actual uh software that's being used to
transmit that data depends upon who it is that's creating
the program or the proprietary right and there they have
not classically made these systems to to work across each other. Right.
So if you have one credit card company that's using

(20:44):
one of these implementations of software and a different credit
card company that uses a completely different implementation, and those
two programs cannot communicate with each other, then as a vendor,
you may have to choose either between two different credit
card companies or you have to spend twice as much
to get as many to be able to support both

(21:04):
of them. So, because there's no standard, okay, but so
there are a few different proprietary ways of using this
in the States right now. Exactly. Yeah. One of the
big ones are at least one of the ones that
probably has the most high profile of all of them.
I mean, it's not the oldest implementation, but it's one
that a lot of people have heard about is Google.
Google has really been behind NFC technology for a while now,

(21:26):
a couple of years and they also have their app
called Google Wallet, which is meant for both payment well
not just both. It's meant for payment transfers, so that
if you're buying something from a merchant that supports Google Wallet.
It's also meant to be able to give you access
to special deals, like if someone's got a sale. It
can give you a notification. If it's some vendor that

(21:47):
you've gone to several times, it might let you know
about any specials that are running. Uh. It can also
incorporate things like customer loyalty programs. So let's say that
I use it for my local coffee shop and the
tenth cup of coffee I get a freak cup. I
don't have to keep track of a card that has
to be punched. It's all. It's all. Yeah, it's tracked
on the app itself. UM So that's a that's a

(22:10):
big one that's got a lot of press recently. And
you know, I have a smartphone that has an NFC chip,
I have a Google Wallet account. I have never used
that to make I've never seen a vendor nearby that
used it. I know there are some because if I
go on their website and I do a search, a
few of them are in this area, this area being
Buckhead in Atlanta, that's where our office is, and I

(22:33):
know there are a few that accept it. I have
never gone to any of them to try it out,
So I mean it's not that I'm afraid of technology.
I just don't have access to it. Yeah, I haven't either.
So then we've got MasterCard. They have a a app
called UH, or at least a technology called pay Pass,
which is a tap to pay method where you use
a physical card that has a passive n FC chip

(22:54):
in it. So it's kind of similar to those passive
r F I D chips we talked about earlier. It
doesn't require a power supply, right, which is important. I mean,
you've got a physical credit card, you don't have a
lot of space to put a battery there, so UH
you end up using the inductive coupling to get this
payment terminal to process the information UM and you can
also have an electronic version of it that's stored as

(23:15):
an app on a smartphone that has enough C chip
and that one is compatible with Google Wallet, which, as
we said before, is maybe not actually useful. Yeah, yeah,
I mean it all depends on you, Like if you
live in San Francisco. There's probably every single place around
you that's that supports it, but here in Atlanta, you know. So. Um.
Another one is one that's done by American Express, a

(23:36):
T and T, T Mobile and Verizon. Uh. This one,
for all you archer fans is uh isis UH. That's
actually the name of it, isis I s I S.
It promotes itself as the industry's most widely accepted mobile wallet,
So it's very similar to Google Wallet, has those same
kind of features, but it's a different proprietary approach. So

(23:57):
again ISIS and Google Wallet. If it's like a Google
Wallet using that MasterCard pay pass, they don't necessarily work
on the same system. So if you have a receiver
as a vendor, you may only be able to accept
one but not the other, which we'll talk a little
bit more about in our our problems with n f
C section. And then of these companies that we've talked about,

(24:18):
it seems like Samsung and Visa have been left out
in the cold. Yeah, you got Samsung Wallet, which is
a partnership between Samsung and Visa, But this one was
kind of a a head scratcher because they announced this
partnership in two thousand thirteen at the Mobile the World
Mobile Congress, which the two fourteen one is happening as
we're recording this podcast. But the two thirteen one they

(24:42):
announced this partnership. They said, Oh, here's what we're gonna do.
It's gonna be this big thing. It's going to be
our approach to this NFC payment processing and all the
sort of wallet features you would expect. And then they
started announcing the upcoming Samsung phones which did not support
Samsung Wallet. So you had this partnership in this technology,
but you didn't have the actual implementation available for anyone

(25:02):
to purchase in the in the flagship products that were
coming out. I'm sure it was a it was a
just missed dovetail kind of situation wherein they couldn't quite
make it go. Yeah. I mean, it might have even
been one of those things where you try and factor
in the price of including another chip in your phone
because that's going to make it more. Sung is always
very priced Savage, Oh yeah, yeah, Well, for one thing,

(25:23):
they're the company that makes a product for every price
point and every use case. I mean, I watched a
video recently that showed a lineup of all the different
Samsung products, and at one point they they joked that
the video editor had died trying to put it together
because it was just too many. That was a scene
Net video by the way, Tales of Adventure or something

(25:44):
along those lines. Great series. You should check it out.
But we've got a lot more to talk about with
this technology, including those pros and cons, and before we
get to that, I think we should take a quick
break to thank our sponsor. Alright, so we've kind of
hit tod that some of the challenges of this whole
NFC approach, particularly here in the United States. Obviously it's

(26:06):
already implemented in other parts of the world, so why
aren't we seeing it everywhere? One of the big reasons,
Lauren you brought it up it is the fact that
to build up infrastructure means investing. It's it costs money,
and especially when you've still got all of these competing
technologies working, it's it's it doesn't make any sense for
anyone to build that infrastructure, right if there were one

(26:28):
of these that came out as the dominant one, and
therefore it kind of just gravitates to that becoming a
standard that would be a lot easier on the merchant's
end of things, because you would just invest in whatever
technology one out. But in these early days, it's really
hard to say which one is going to be the
most important, and in fact, it may change from vendor

(26:49):
to vendor. You might do some market research of your own,
just look at past transactions that you have that you've
managed over the time that you've been a merchant, and
you might see perhaps your business, for some reason or another,
you just process more payments through American Express, which means
you would want to go with that isis approach, right,
So it makes more sense to you just because the

(27:11):
vast majority of the people who come into your store
are using American Express cards. But if they're all using
Visa cards, or they're all using MasterCard, or there's a
real strong mix in there, your decisions start getting really
murky and complicated, and you may end up investing in
an infrastructure that ultimately fails to take off because some
other technology becomes dominant. Well, then you've got a real

(27:35):
problem on your hands, right, You've spent all this money
with no payoff, absolutely, and and that's that's even assuming
that people are using these NFC cards a lot of
people still have meganetic stripes, and so therefore it's it's
a dual problem. You know, if if you can't get
customers onto these new cards, then they can't use your
system and no one it's just yeah, it's it's kind

(27:56):
of us catch twenty two's right. So you know, you
you want there to be an existing base of customers
out there who have this technology so that your investment
makes sense. But the customers don't really want this technology
unless there's ways to use it. So yeah, it's this
this weird problem where you have to have the solution
to have the problem in order to solve the other half,

(28:17):
and it's ways. Yeah, And one of those barriers to
getting customers to sign up for these for these NFC
cards is the security question, right, because if you're talking
about transmitting information by radio already you have people wondering
about the possibility of eavesdroppers, someone carrying some sort of
device that can read off the information on a chip.

(28:40):
A couple of different things to keep in mind here. One,
if you're talking about an active NFC chip, something that's
actually drawing power from something like a smartphone, it's really
only gonna be broadcasting when you tell it to broadcast,
so when you're using the app to actually make a purchase, unless,
of course, your smartphone itself has been hacked in some way,
in which case you've got multiple problems, not just NFC absolutely, uh.

(29:03):
But you know, since it is a radio communication, once
that once that transmission is active, it can technically be
picked up from up to like ten meters that's about
thirty three ft away, right, Yeah, so there is that concern. However,
one way to get around this concern is to use
our beloved friend encryption and encryption. I mean, this is
it's obviously going to be important for any company that

(29:25):
wants to utilize NFC transmissions because if you don't show
that you value the safety the financial safety of your customers,
you're not going to have customers for very long. So
this is actually pretty sophisticated stuff, and there's encryption along
multiple steps, so it's not like it's just a simple

(29:46):
it's not like a transposition cipher where A is B
and B A C and C s D. They'll never
figure that out, right, right, When when an NFC card
and a card reader come into contact with each other,
and there's encryption levels involved. There's there's this whole series
of sign countersign kind of exchanges that are going to
verify that that each bit is dealing with a verified bit. Right,

(30:08):
So if you were to eavesdrop on that, all you
would get is the pop product of this conversation, which
would just be gobbledegook from your perspective. You wouldn't have
the description key exactly, and nobody has the key in
this situation. I mean, it's it's a it's a temporary,
one time use kind of thing. And again, this technology
is primed to only talk to one device at a

(30:29):
single time, so that cuts that down quite significantly. Also,
when you look at it, you know, even though you think, well,
this sounds like there's some security issues, it's actually safer
than our old magnetic stripe technology. Right, So even if
you feel like this has got its own kind of drawbacks,
it has fewer drawbacks than the stuff we're depending on

(30:50):
right now. Oh. Absolutely, the data on a on a
magnetic stripe can be read, written, deleted, or changed with
pretty common equipment. Yea. This is a reason why, uh,
when I stay at a hotel that uses a magnetic
stripe key, I tend to keep the key because you
never know what's actually been encoded on that key. There
could be I mean some places use the key as

(31:11):
also a form of payment, where you can buy stuff
at a restaurant that's in the hotel, or or a
shop in the hotel. It's a general identification tool. Share. Yeah,
so I'll keep those keys and then shread them at home.
I really do. That's smarter than I am. So and
I'm not known as a privacy nut. I mean, I'm
an advocate, but I don't. I don't get like super

(31:32):
paranoid unless I happen to be around someone like Darren Kitchen,
because the dude is a brilliant hacker, nice guy. I
just I just feel like everything I ever said on
the Internet is in his hand anytime I happened to
be near him. But other than that, I'm pretty easy going.
But this is one of those steps I actually do take.
That's that's not paranoia. That's intelligent different. It's not paranoid

(31:53):
if they're really out to get you. Uh. And so, Also,
like we said, these transactions, in every implementation I I've
seen where you're using it to make a payment, it
requires that you enter a pin as well. A personal identification,
right instead of a signature. Right. So when I would
make a payment at that coffee shop, in order for
that payment to go through, I would first have to
input whatever the PIN is, you know, however long that

(32:15):
might be. It's usually a four digit number, that's what
we're used to in the United States. Then that would
allow the transaction to continue. So in other words, if
you lost your smartphone and someone picked it up, you
wouldn't have to worry about them automatically being able to
use that smartphone to go on a spending spree, right right.
I honestly, magnetic stripes kind of terrify me. They. I recently,

(32:36):
when I was out to dinner with a friend, we
we accidentally exchanged credit cards. When we got the bill back,
and I used his card for two days before I
noticed that it was his card with no problems. Yeah,
the security measures in the United States are a little
on the lax side, depending upon where you go. Some
places are really good about it, like, for inst instance,

(32:57):
I have on my card ask for I D written
on the back rather than my signature, which is a
terrific way of cutting down at least on that kind
of kind of problem. So whenever anyone apologizes but asks
for my idea, I tell them, do not apologize. That's
what I want. I want that extra level. The problem
is it just doesn't happen as frequently is should but
at any rate. So now that kind of brings us

(33:20):
Chase one of us to talk about coin. So we
we covered the NFC thing. Coin is not and NFC
enabled credit card. It's actually a different implementation of electronic
credit cards, and it's a really nifty idea and the
implementation is something that I've never seen before, and I
find it kind of exciting and I like the I

(33:41):
like the notion of it. But it also has some
drawbacks that we're going to talk about. Sure, But but
it is but it is really cool. I got so
excited when I saw it. So it's it's the same
size and shape as a standard credit card, and it's
a it's it's a crowd funded effort. This is this
was a startup that got some of its funding at
least by asking people to make contributions to their company.

(34:04):
So what exactly is it? Well, it's build as a
device that can replace every type of credit card, loyalty card,
gift card, and membership card all in one go. So
in other words, instead of having to carry ten or
fifteen different types of cards, depending upon the kind of
person you are, you would only have to have one.
And it works like this because it's it's actually a

(34:27):
computer in a card. Um that magnetic stripe on it
is readwriteable, right, So not it's not. You know, a
typical magnetic stripe on a credit card is read only you.
You aren't. Hypothetically, you're not supposed to overwrite it. Uh,
there's nothing that's given to you in the credit card
that allows you to overwrite it. There are technologies that

(34:48):
where you could overwrite the information on your magnetic strip,
but it's meant to be read, right, Yeah, don't do that.
By the way, it's almost certainly illegal where you are.
But then you rate. This is designed so that it
can on the fly change that magnetic strip to mimic
whatever card you would be using. So, for one thing,

(35:08):
whatever card you're using would need to have a magnetic
stripe as part of its way of being read by
whatever vendor. So if you have a loyalty card that's
punched card, that's not necessarily gonna you don't want to
punch a hole in your coin smart card, that would be.
But if it has some sort of counterpart where there's
a magnetic strip or that they just implement that into

(35:31):
their their vendor system, then you could use it as
a loyalty card or whatever. U. So yeah, this this
little computer on the fly can change the programming on
that magnetic stripe to be whichever card you need. So
the big advantage from the merchant's side of this is
that they don't have to install one of those crazy

(35:52):
readers that NFC or r F I D would need, right,
They could just use their their established credit card reading
equipment to do this. Because that magnetic strikes the same
thing on the coin card as it would be if
you were using the actual credit card that it's mimicking.
So when you you swipe it, it's just going to

(36:13):
read as if it were your Visa or MasterCard or whatever. Right,
And the advantage to you is that you can you
can enter all of your systems of payment and loyalty
that use these magnetic stripes into into the app. Yeah. Yeah,
So the way this would work is you pair the
coin smart card with something like a smart phone that
that's running this coin app on it and you also

(36:36):
get a little a little um uh peripheral that plugs
into your phone. It's kind of like one of those
square card readers that you've seen that that merchants often
will use, where it's hooked up to an iPhone. You
just swipe a card through the square things. Yeah, because
it turns anyone, it's like anyone into a mobile payment
processing system and you can have I mean for people

(36:57):
who run things like they go to a convinced and
they have a booth set up at a convention for
them to sell merchandise to people. This is great because
it has such a low barrier of entry. The cost
is really low. Yeah, it's it's essentially free, and then
you pay a certain percentage of each of each swipe
of transaction. So so it's great anyway. But this technology

(37:20):
works very much the same way. It's got a little
swipe reader that you connect to your phone, and as
you swipe a card, it stores all that information that's
in that magnetic stripe onto the app and then relays
that to the coin smart card, so that the coin
smart card is able to mimic that particular credit card
or loyalty card or whatever it is. Uh. You're also

(37:43):
supposed to take a picture of that card, so that
way you will be able to cycle through the cards
properly when you're using it and remember which is which. Yeah,
because if you know, if you have been to have
a check card and a credit card, and it's really
important for you to use the right one. Yeah, I've
known some people who remember as entire credit card numbers
of their own. But I know, yeah, I know folks

(38:04):
who make enough purchases online where they've committed all of
the cards they have to memory. I don't do that frequently.
I have a hard time with like my phone number
and my social Security number. I had a hard time
with the three digit security code that's on the back
of your card, which every single card I've owned, that
number has worn off within like three weeks of getting

(38:26):
the card. So I have to commit this three digit
number to memory, which shouldn't be a problem, but I
got a lot of brain cells that are dedicated to
firefly trivia, so apparently a three digit number is a
herculean task for me to remember at any rate. So
you swipe all your cards, you differentiate them. Your coin

(38:46):
smart card can then represent any of those cards, so
you can then put those those physical cards simply safe. Um,
keeping in mind that there are some some instances where
you might run into some trouble. I'll get into that
when we get into some of the cons sure, but
so okay, So so coin interacts with your cell phone
through Bluetooth low energy. It's so good that we already

(39:08):
did that podcast, so we don't have to go into
what this is. But it does mean that the smart
card and your app can communicate up to a fifty
meters away from each other or or thereabouts. That's like
the ideal maximum range. Uh So this actually allows you
to have some cool features built into that smart card
a right. One of its security features is that if
your your coin card gets out of range, out of

(39:30):
that fifty ish meter Bluetooth loow energy range of your phone,
your phone will send you a little alert saying like, hey,
you might have left your card somewhere. Yeah, which I
have done a few times at restaurants. So this would
actually be that little bit of security where if someone
took your wallet but you still had your phone, then
you would get an alert. So you knew that you
would know, maybe faster than normal, that you've been pickpocketed

(39:54):
or if you're just happen to be careless occasionally, you know,
once in a blue moon, then it would all to you.
If you had left your card behind, you can immediately
go back and reclaim your card, which was pretty cool.
It's designed to be really energy efficient. That bluetooth low
energy stuff is pretty cool. So the battery in the
card should last a good couple of years, and then
after it's out, you just replace it the way that

(40:16):
you would replace any other magnetic stripe card exactly. And
that's another thing is that you know that magnetic stripe stuff,
that that material can wear down after lots, especially if
you happen to be a frequent shopper. Um So in
that sense, you would need to replace the card anyway
because it would actually physically wear down. But the battery itself,
you don't recharge it, right, there's no you don't plug

(40:37):
your smart card in at the end of the day.
It will actually hold that charge for two years. Okay,
But so this is all really cool, but it sounds
to me like it's not going to solve this problem
of magnetic stripe card information being pretty insecure compared with NFC. Yeah, yeah, exactly,
if you happen to have a device that can read
a magnetic stripe. Well, worst case scenario, let's say that

(40:59):
some on some um person working at a a any
kind of merchant, who has decided they're going to set
out on a life of crime, and they have invested
in a magnetic card reader where they can swipe and
store information. Let's say that they've got ahold of that,
and they get ahold of your card. Maybe you've handed

(41:21):
it over for a purchase and you think you're just
making a regular purchase. Meanwhile they are cycling through every
single card you have and reading it. Not only would
they have access to whatever card you were using at
the time, they might theoretically be able to access everything.
Now they're they're ways of getting around this with the app,
so that if you cycle from one card to the next,

(41:41):
you have to agree to it. So in that case,
the worst case scenario is they just get access to
whatever card you're using at the time for that transaction,
as opposed to every card you own. So better, Yeah,
it's better. It's better. It's way better than suddenly saying, oh,
my Visa card was lifted and my Master card, my
American Express card and I no longer have nine cups

(42:01):
of coffee at my favorite local coffee right. Apparently I
made a purchase of fifty seven cups of coffee today,
don't have any memory of that, possibly because of the
caffeine affecting my brain, or more likely I have been hacked.
So yeah, there's that issue. Also, um, you know, they
could store a lot more information on them than a

(42:22):
credit card would typically have on it. So in theory,
if someone were able to get access to maybe the
worst case, they get access to both your phone or
whatever device you happen to have paired with your card
and the card itself, they get to get access to
lots of personal data, so that would be an issue too. Also,
I do want to put in that magnetic stripe cards

(42:42):
and and computerized magnetic magnetic stripe cards. I'm going to
figure out how to say that by the end of
this podcast. I swear like coin are not the only
things that you can put a whole bunch of different
information on. NFC chips are capable of holding multiple kinds
of all kinds of info. Yeah, yeah, yeah, exactly. It
doesn't have to just be uh financial oriented or even

(43:03):
how many times you've bought that cup of coffee. Yeah,
in Europe they're they're used as patient I D cards
that store a certain amount of medical information on them. Right. Yeah,
So I mean the convenience feature I totally understand, right,
Especially if you are someone who has lots of different cards,
the coin approach makes a lot of sense from that respect. Personally,
I don't actually carry a lot of different credit cards,

(43:24):
so for this, I would think it was a really
cool technology, but it wouldn't be terribly useful for me.
The cards that I do carry I want to keep
very very separate and not have any chance that would
excellently use one that rather than the other. Um. But
I could see how this could be really important for
someone who has multiple cards that they're constantly magic, particularly

(43:45):
if you're one of those people who have that that
you know, guys, you know what I'm talking about where
you can't sit upright because your wallet is so thick
that you're always kilted at an angle. Um. You know,
I feel you. I used to be you, but I
I've managed to I did. I got rid of a
lot of loyalty guards. I said, you know what, my loyalty.

(44:06):
You can't put a price on it. I'm a free agent.
I go where I want to. But yeah, so that's
you know, things to keep in mind. You are you're
you are a coffee rebel, Jonathan, I am. Yeah. Look,
just because I went into Starbucks, you know, twelve times
last week, doesn't mean I'm going to go to that
one today, despite the fact that's the most convenient because
it's right across the street. Anyway. Yeah, it's interesting technology.

(44:29):
I love the idea that it's a read write magnetic strip.
That to me is just cool that it's oh yeah,
you know, it's kind of like it it makes me
think of something that you would see in a science
fiction movie, like you know, Blade Runner being one of
the favorites around here in the office. But it's right
here right now. So yeah, so thank you Chase for
for asking us about that, because although although it is
it is a technically kind of separate conversation from the

(44:50):
NFC technology one, it's still related and I'm excited about
both of these technologies upcoming. Yeah. Yeah, yeah, especially uh,
you know, we're seeing, like, like we said, deadlines here
October two thousand fifteen for these smart cards coming up
from the major credit card companies and hopefully that will
also mean that we'll have an agreed upon standard at
that point. And also the coin Um smart card I

(45:14):
think they're launching sometime in the summer of two thousand
fourteen is when they should start seeing the actual products
start getting into Backer's hands. I'm I'm wondering how this
NFC decision is going to start affecting coin and whether
or not Coin is running a little bit scared right now. Yeah,
it could be that's one of those great ideas that
launched too late. Uh you know, I'm sure we're going
to see support from magnetic stripe sticking around for a

(45:36):
little while. Anyway, I mean, merchants are going to probably
have multiple things that will have to rely upon, so
if you if I can't imagine anyone just throwing the
system out the window, and unless they decided to do
it like office space style, which is fair. That also
was did bring up one other issue I thought of
with the possibility of using coin as a payment. I
totally it's slipped my mind, but now it's come back

(45:58):
to me. If our is lost to the facility you're in,
so some places still have those old carbon copy uh
devices where you put your card down, it makes a
hard carbon copy of whatever is. And this is also
something you'll see if you go to like conventions or
things like that where people aren't able to afford the
electronic versions um or perhaps there's a a malfunction of

(46:20):
some sort, or if you're in the basement of a
large hotel, for example, and you cannot use a card
swiper that's to be transmitting via three G. Yeah, yeah,
you can't get a signal, the WiFi is completely worked. Yeah,
you've gotta You've gotta figure something else out. Well, a
coin card won't help you in that sense because it's
not going to have the physical numbers on the card

(46:41):
for them to copy using this old method. So if
there ever is a situation where you have to make
a purchase through a merchant who doesn't have access to
WiFi or three G or anything like that, or a
telephone line, then I mean, granted, that's you know, one
one case out of you know, a hundred that you
would be encountering on a normal basis, but still something

(47:03):
to think about. It's something where the coin method would
not work. Every time it rains. My favorite tie restaurant
is off limits because I don't have cash on me.
Oh wow. That's well, whenever I go shopping at at
any sort of convention or conference, like if I'm looking
at gift shops or you know, Dragon Con here in
in in Atlanta has an enormous actually sometimes more than
one enormous dealer room that has all these different vendors

(47:27):
with cool stuff in it, but a lot of them.
You know, the one booth might be really technologically savvy
and ready to deal with anything, and the next booth
might be, you know, you need to you need to
barter with chickens. It's just it's they run the whole gamut,
really they do. And I'm personally sick to death of
carrying chickens with me to Dragon Con. I'm not happy
about either. It's just it's not convenient. So anyway, thank

(47:51):
you so much Chase for asking about coin. It was
fun to get into that. And I hope that this
kind of gives some of our our u S listeners
and a better idea of what enough See is all
about and what they can expect to see over the
next couple of years. And uh, for those of you
in other places where you've been using NFC for a while,
maybe you learned exactly what's going on behind the scenes

(48:11):
of that technology you depend upon frequently. I hope that
this was helpful for you guys too, And if you
have any suggestions for future topics that we can tackle
here at tech Stuff, here's what I want you to do.
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(48:34):
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