Coin – A Smart Credit Card

A few years ago, when Square launched, I was pretty negative about the hype surrounding it mostly because the continued dependency on magnetic stripe bank cards in the US mystifies me. Now I am starting to see smart card and NFC touch payment terminals appear in more and more merchants. So, I was disappointed to see Coin launch what is essentially another solution dependent on the extremely dated magnetic stripe technology.

Admittedly, all the credit cards in my wallet are still using magnetic stripes, but that is something I am seriously hoping will change soon. When I left the UK, almost 16 years ago now, smart cards were already common (locally referred to as “chip & pin”). So why are all these technology companies, not to mention the banks, still focused on magnetic stripes with all of their inherent security problems.

Security 

Coin’s very existence in many ways depends on the ease with which a magnetic stripe card can be cloned. If the cards could not be cloned using low cost hardware, then Coin would not really have a product. Technically, creating a dynamic magnetic stripe as well as all the proximity protection and encryption that fits in a card slim enough to work with existing readers is very clever. At the end of the day though, what they have created is a card cloning solution. I will be interested to see what reaction it gets when I present it in stores (I pre-ordered one today).

It would have been nicer though if they had found a way to convert that magnetic stripe card into something non-magnetic. Perhaps NFC based. That would have been a huge step toward both in terms of security (especially if they disabled it when it was not in use to avoid some of the concerns about the cards being readable remotely while in your wallet).

Square’s position was actually a little better I think on the security front. While they were on the other side of the transaction, being the payment processor that need to accept cards, they did provide an innovative solution to security in the form of allowing card holders to associate a photo with their cards which would then be shown to the merchant when they swiped as an extra confirmation that it was you presenting the card. Of course, banks have had that option for years in the form of printing a photo of the card holder on the cards – one of my credit card issuers stopped doing this several years back though to save money! Perhaps a reaction to much of the fraud moving online, or to places where there are unattended card readers like gas stations.

Convenience

Storing multiple cards in the device seems like an interesting idea, but I can’t help wonder how well it will work in practice. I don’t carry many credit cards anyway, and I prefer to use one whenever possible (not all merchants accept it, and in those cases I have to fall back on a second card).

Still, carrying just one card instead of two or three will cut down on the stuff in my wallet. If it could absorb store loyalty cards that would be even better. I think there is a huge opportunity out there for the company that can absorb all of these cards into one. Especially if they improve the security too.

Proximity

Another interesting feature of Coin is the use of a proximity fence set up with your smartphone. If the card is separated from the phone it shuts down. The phone also warns you that it has lost contact with your card. A nice feature to prevent you accidentally leaving the card in a restaurant. Of course, every time go give it to a waiter to run that alarm will likely go off too. (That is another security weakness in the US handling of bank cards – in Europe you don’t give your card to anybody; they bring the card reader to you.)

Be careful at dinner time too – if your phone runs out of batteries before you’ve paid the bill for dinner, you may find yourself unable to pay. Same would happen if you run out of the house and forget your phone. 

Summer 2014

The pre-order form stated that they don’t expect to deliver until summer 2014, so there is clearly still some stuff to be worked out. I pre-ordered mine today though and it will be interesting to see what develops between now and the card arriving.

I should note that my UK bank sent me a new debit card today to replace my expiring one; the new card has a magnetic stripe of course, but it also features both smart card and NFC touch payment capabilities. If a dumb debit card can handle three interfaces why can’t a smart card like Coin?

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