The flurry of smartphone payment offerings under development have caught the attention of Consumers Union, the non-profit publisher of Consumer Reports. Its verdict, as of now: while the mobile payment technologies may be convenient and fun, they are not necessarily safe.  At the very least, says Michelle Jun, staff attorney for Consumers Union, the mobile payment systems need to be covered by strong rules to protect consumers from losing money because of fraud, processor error or a dispute with a retailer.

For instance, federal law protects consumers when their credit card or debit card is lost, stolen or misused. These protections, though, don’t necessarily extend to all new types of payments. Mobile payments will only add to the confusion, Jun says.

Coming to Market

A call for greater consumer rights, however, is hardly likely to stop the development of mobile payments systems, given the players that are now involved. Coming to market is a program from Bank of America that would let customers use their smartphones to pay for purchases in stores. Consumers would install small chips in their devices that emit radio signals over very short distances and then "bump" or wave their phones with or at the point-of-sale devices in stores. Their bank account data is then collected and purchase is completed.

Also AT&T, Verizon, T-Mobile Discover Financial Services and Barclays are reportedly working on a project in which smartphones could be used as payment devices. Here too, contactless technology would convey the payments through Discover's payment network. Then there is Square, a venture launched by Twitter co-founder and chairman Jack Dorsey last year. The company sells a tiny device that plugs into a mobile phone's headphone jack and scans swiped credit cards. With the device, a shopper can pay for a product and receive an invoice by email.