A guide to the top mobile payments options

Martyn Williams

The launch of Apple Pay last month jump-started the mobile payments business, with several companies pushing hard to become your preferred payment method in stores. Even more competitors are on the horizon, promising to bring a lot more security and convenience compared to today's plastic payment cards.

The magnetic-stripe cards currently used in the U.S. are simply not very secure. Your name, card number and expiration date are all encoded on the stripe without protection, and hackers have been targeting payment terminals to steal that data, jeopardizing the security of tens of millions of card holders.

Banks are racing to introduce more secure, chip-based cards by October 2015, but phone-based systems like Apple Pay and Google Wallet are here now and offer a good deal of convenience and security. But not all mobile payment systems are equal. Here's a look at the major systems out there and how they work:

Apple Pay
Included with the iPhone 6, iPhone 6 Plus and upcoming Apple Watch, Apple Pay allows users to load their credit card details and then make payments using a short-range wireless system called NFC. With it, users simply bring their phones close to a terminal for a payment to be made. It's more secure too, because the card number isn't sent. Instead, a substitute called a token is sent so the retailer never sees your card number. The token, if stolen, is useless for subsequent purchases and the only time it gets matched to your card number is by your bank.

Apple has created a system that's incredibly easy to use: the cardholder authenticates the transaction by putting their thumb on the phone's fingerprint sensor, which happens in seconds. It only works with banks and card companies that have partnered with Apple, but that list is growing. Apple is keen to point out that it never sees details of your purchases. Only U.S.-issued cards are supported at launch, but it will expand to other countries in 2015.

Google Wallet
Also based on wireless NFC technology, Google Wallet appears similar to Apple Pay, but it's a little different behind the scenes. When paying with Google Wallet, Google assigns your phone a MasterCard number. It exists only in your phone -- you don't receive an actual card, and you don't have to go through a credit check. When you pay, the retailer gets that MasterCard number and Google immediately charges your chosen credit or debit card for the same amount. The two-step process, which is invisible to the user, means any U.S. debit or credit card can work with Google Wallet. It also means the retailer never sees your actual card number, which makes it more secure, but also means that Google can see every purchase you make.

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