A wireless electronic authentication device with an authenticating smart chip, a local radio communication circuit, an input circuit that receives user input, and a power supply, all housed in a portable housing. Preferably, the authentication device is a mobile telephone with an authenticating smart chip. The user enters a knowledge token, such as a password stated by voice or a personal identification number input at the keyboard, to indicate that he is both in possession of the authorization device and knows the critical information. The knowledge token may be entered in advance and merely confirmed by the user pressing a key on the keypad when a confirmation is requested. A method is provided for making use of the authentication device to perform authorizations. A similar method is disclosed for use in existing systems and then achieving a gradual transition from existing systems to the new authentication device.