A Digital Wallet That Works Almost Everywhere

The idea of replacing the typical jumble of insecure plastic credit cards with a single, secure, phone-based digital wallet that could virtually represent multiple cards isn’t new. It pops up in a big way every so often, and then it fades.

The last big push came from Google, with its Wallet app and Android phones using a wireless technology called NFC that could transmit payments from phones to new or modified credit card readers in stores. But it hasn’t taken off, partly because it requires stores to invest more in their card-reading equipment, and partly because it only works with certain Android phones, and none from Apple.

But what if there were a smartphone-based digital wallet that didn’t require modifying either consumers’ phones or the card readers used by businesses? What if it could hold multiple cards, let you choose among them, and wirelessly transmit the same information contained in a card’s magnetic stripe without using the card or swiping?

Well, now there is such a product. It’s called the LoopPay system, and it consists of two parts — an iPhone app called LoopWallet, and a detachable fob you can use both to load the app with your cards and to pay, with or without the phone, at standard, everyday card readers used by all kinds of merchants. The system is made by LoopPay Inc., of Burlington, Mass.

I’ve been testing Loop for nearly a week, and found it worked quickly and easily, with multiple cards, at a wide variety of merchants, ranging from my local dry cleaner to Macy’s. I used it to pay for medication at a drugstore, and to pay for a haircut. I bought groceries with it at two different stores, coffee at Starbucks and some new earbuds at the Apple Store.

But there were a few failures. While it worked fine at one of the country’s two biggest drugstore chains, CVS, it didn’t at the other, Walgreens. And, while it worked at McDonald’s, it bombed at both of the local, solo neighborhood restaurants where I tried it.

Overall, it worked 14 out of 17 times in my tests, and at 10 of 13 establishments where I tried it. And it usually worked instantly, on the first try, as nervous or curious store clerks looked on.

However, in its current form, I wouldn’t recommend LoopPay for the average user. It isn’t yet built into phones, so you’re not really freed from needing another object to pay. And its first hardware accessory for payments, the $39 Loop Fob, looks clumsy when plugged into the iPhone, and is kind of chunky when used alone in its soft rubber case.

But Loop is just getting going. A $99 iPhone case that transmits payments (and also includes a built-in extra phone battery) is due next month. A thinner, non-battery case with a slender, slide-out payment fob is due in June.

And the company ultimately hopes to persuade phone makers to build in its magnetic stripe emulator by 2015, so phones can just beam the payment info to store terminals without cases or fobs.

The company sees its secure software wallet — not any one accessory — as the key to the system.

LoopPay has some competition coming, from two sources.

First, there’s a digital product called Coin, due this summer, which also uses existing magnetic stripe terminals and a smartphone app. Coin can also hold multiple cards, but it takes a different approach. It is a thin device that is actually swiped like a card and carried in a wallet. LoopPay claims its solution is superior because it can be built into multiple form factors, including the phone itself.

Second, after recent credit card security breaches, it’s expected that U.S. banks will now finally begin to switch to cards with a built-in chip, common in Europe, which are considered more secure. LoopPay says that isn’t a problem, because the changeover, which will require new store equipment, will take a very long time, and the new chip-based cards will continue to also function as magnetic stripe cards during the long transition.

To use LoopPay, you download the free LoopWallet app and order the fob from the company’s website. Then you plug the fob into the iPhone’s headphone jack and use a swiper built into the fob to load in your credit, debit and loyalty or gift cards that use magnetic stripes. (The forthcoming case will come with a separate swiper for this purpose.)

For my tests, I swiped in a Visa, MasterCard and American Express card. I also took photos — which the app also stores — of my driver’s license and of a grocery-store loyalty card.

After setting up a password and a PIN code, you then select one of your cards as the default, and go out into the world to use the system in one of two ways.

You can plug the fob into the phone and tap it on the swiping slot in a credit card terminal to pay. Or you can remove the fob, pop it into its soft rubber case, and use it the same way but without the phone, by pressing a button on its side when it’s touching, or very slightly separated from, the terminal’s swiping slot.

Using the fob with the phone is more secure and versatile, since you have to enter the PIN to pay, and you can pick any card to use. Using the fob alone, you can only use the default card you set in the app, and you can’t require a PIN. Instead, before removing the fob from the phone, you can optionally set a time limit for how long it will remain active — always, eight hours, or 10 minutes.

LoopPay says its system is secure because the credit card data is stored in a secure area of memory on the fob or other accessory device and, before the app accepts a card you are swiping in, it checks its number against the account holder’s name. Also, each fob is “bound” to a single phone.

LoopPay says its system works with 90 percent of magnetic swipe terminals. It doesn’t work with the type used at ATMs and gas stations, in which the card must be inserted into a slot.

The company says the three failures I ran into — at Walgreens and the two local restaurants — were due to software in the terminals that wasn’t up to date. But the odds of a small startup getting either a retail giant or a local restaurant to change software seem slim to me.

I also ran into a glitch at one point where the cards displayed in the app disappeared for a few minutes. They appeared again after I rebooted the phone and reinserted the fob. The company claims I must have lost my connection to the Internet briefly.

Bottom line: LoopPay has a good idea, but I don’t believe it can come to full fruition until and unless its technology gets built right into smartphones.

This article originally appeared on Recode.net.

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