The smartphone as a spending tool

Your smartphone is a money machine, and I don’t just mean those outrageous monthly bills. At thousands of businesses, you can use a phone instead of a credit or debit card to make purchases. It’s a slick idea that works well enough to make me nervous.

Google Inc. offers Google Wallet, which lets you pay by tapping an Android phone against a terminal. There’s also LevelUp, a Boston-based company whose smartphone app pays your bill by displaying a bar code. And Square Inc., the company that lets anybody accept credit card payments through a smartphone, launched a service that uses your face as a substitute for the card itself. Even PayPal, the online payments company, is getting into the act, with an app that works a lot like the one from Square.

These apps are hardly more convenient than the card in your wallet, but they are cleverly designed and fun to use. They all do basically the same thing — use your smartphone to dip into your credit card or checking account — but each one works differently.

Advertisement - Continue Reading Below

Google Wallet, for example, uses near-field communications chips, which are built into certain phones that run the company’s Android operating system. The chips communicate on contact with the credit card terminals at many retail stores. When you set up an account, you enter your credit card information into your Google Wallet. Then you can use that card by entering a PIN and tapping the phone against the terminal.

Major retailers throughout the United States have Google Wallet-compatible terminals, including Macy’s, Walgreens, CVS, and Old Navy. And Google Wallet is backed by the world’s biggest, richest Internet company. So it’s bound to catch on, yes?

Maybe not. Right now, only a few of the newest Android phones are compatible, and only one of the nation’s four biggest cellphone carriers — Sprint Nextel Corp. — allows its Android phones to interact with Google Wallet. If you use AT&T, T-Mobile, or Verizon Wireless, you’re out of luck.

At any rate, getting the service to work was a chore. I tried Google Wallet at three retail stores near the Globe, but it worked at only one: a Rite Aid drugstore on Dorchester Avenue.

I had much better luck when I used Square’s new payment app at Render Coffee on Columbus Avenue. Pay with Square is a free app that runs on most Apple or Android smartphones. You set it up by loading your name and a picture of yourself into the app, along with a credit card number. Then go to any retailer that uses the service, launch the app, and click a command that opens a tab for you at that store.

When you go to buy something, your name and picture appear on the store’s point-of-sale computer. The clerk compares your face to the photo. If it’s really you, he clicks an icon, and the sale is made. It’s a cute and clever way to spend money.

PayPal agrees; it has just launched an app that works the same way. I wasn’t able to test it because hardly any merchants in the Boston area have signed onto the service.

The same problem afflicts LevelUp, a handy mobile payment service that I’ve been using for months. When you launch LevelUp, one of those square QR bar codes appears on the screen of your phone. The merchant uses another phone to scan the image, which is translated into the number of the credit card you have preprogrammed into the app.

I’ve used LevelUp at the Alba Deli in Quincy, among other places, and it works like a charm. Like Pay with Square, stores must install extra hardware for processing payments. Maybe that’s why so few merchants are currently on board.

But Seth Priebatsch, the company’s “chief ninja,” has a strategy. Unlike regular credit cards or other mobile payment services, LevelUp doesn’t charge merchants a processing transaction fee. Instead, the company plans to make money by running special advertising promotions for the merchants.

There’s one problem with all of these services: Nobody needs them. Traditional credit cards work fine. And the new apps are another way for businesses to collect more personal data about us, in an effort to sell more stuff. The bank already knows everything I buy; should Google know, too? Something to think about before your next smartphone shopping spree.