MasterCard tests payment cards that require user's smartphone to be nearby

MasterCard (NYSE: MA) announced on Tuesday that it has partnered with Syniverse, a mobile technology company, to develop an opt-in pilot which allows users to make a credit card transaction only when they have their mobile device in the same geographic location. In essence, if the phone is near the place where the card is used, then the transaction is approved.

"We can actually make sure that when we see a transaction we can confirm you are actually where you say you are," James Davlouros, VP of global strategic alliances at MasterCard told The Wall Street Journal.

The service is free for anyone who wishes to sign up. Users must opt-in to the service, which requires a card to have a mobile device registered to it in order to "ping" a particular location at the time of purchase. The pilot program is only available in Europe, but will be launching later this year in North America, Europe and Asia.

The program has been touted as especially useful for those who are traveling abroad, where oftentimes transactions are rejected because the change in location raises red flags at the credit card company. MasterCard reports that these are known as "false-positive transactions" and that up to 80 percent of declined transactions abroad are actually legitimate.

The only drawback to how the system works is that some users turn their phone to "airplane mode" or deactivate their device's mobile data when in another country to prevent expensive roaming charges. In order to encourage users to keep their mobile connections enabled, MasterCard and Syniverse will offer prepaid data packages that users can buy directly from their device upon arrival in another country.

For more:
-See this Wall Street Journal article

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