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Fred Williams

iPhone fingerprint scanner gives mobile payments a push

If you have been waiting for your smartphone to take the place of credit cards, debit cards and PIN codes at the cash register, take heart.

The fingerprint reader on the new iPhone 5S announced this week brings the mobile wallet a step closer, experts said.

"My gut is, this is a great first step," said Madeline Aufseeser, senior analyst with the Aite Group. "It's a great way for them to authenticate access to the phone device itself, which will eventually aid access to the (digital) wallet."

iPhone fingerprint scanner gives mobile payments a push

The idea of a mobile wallet is to let you pay for things by waving your phone at checkout counters and vending machines. Apps connected to the device could help track your budget, manage your rewards points, and pick the best card to use for a given transaction. Of course, it's important to verify that the right person is using the phone.

According to experts on mobile payments technology, the Touch ID function on the iPhone 5S is a breakthrough for making transactions on your phone more secure. Scanning your fingerprint is both easier and more secure than typing a PIN or password. But there is still a lot of ground to cover before phones become widely used as payment devices.

Apple announced that its new iPhone will -- come in different colors!  After the excitement died down, word of the device's fingerprint technology started to get around. A sensor built into the home button scans your digit using faint variations in electronic impulses -- not a photographic image. The fingerprint information is stored in a secure area on the phone's chip, the company said.

Setting up Touch ID is voluntary. Once set up, it can be used to unlock the phone, and to support purchases on iTunes. Apple says the fingerprint isn't sent to the cloud, and it isn't shared with apps from third parties -- such as banks and credit cards.

However, mobile banking apps wouldn't need the fingerprint itself to verify your transactions. All they need is a thumbs-up message from the phone saying that the device is in the right hands.

"Apple can hand off a seal of approval on the consumer without giving the actual fingerprint data," said Rick Oglesby, senior analyst at Aite Group. So at the least, text messages used to confirm bank transactions would gain a layer of security, when your phone knows who is pushing its buttons.

Mobile payment technology will be built into next year's iPhone model, analysts expect. Meanwhile, Android-based phones are also reportedly working on fingerprint identification and payment systems.

Some limited-use payment systems in use today provide a glimpse of the future. If you use the Square Wallet app, for example, you can pay for your latte at Starbucks by scanning your phone at the register.

Apple, meanwhile, is working on technology that would let your phone talk to the cash register while it is still in your pocket. Oglesby said that in-store communication architecture built into the new iPhone's software is actually a bigger advance for payments than the fingerprint sensor.

Google, Verizon, PayPal and others are looking for major roles in mobile transactions, in addition to Apple. Before smartphone payments go mainstream, a standard for the technology will need to emerge from the mix. Then, retailers will have to decide if it is worth investing in the new equipment.

Having a one-button fingerprint ID could streamline those transactions, "if you get high enough reliability," Oglesby said, "and it's not thrown off by darkness or other conditions."

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