30 October 2014
Payment innovation: Embracing the paperless economy
The way we pay for goods and services is undergoing a revolution - with transactions increasingly shifting from the physical to the digital realm.
Not only does facilitating 24/7 payment bring increased convenience to individuals, it eliminates the cost of taking that same payment in a call centre or face-to-face, so staff have more time to dedicate to customers requiring greater one-to-one support.
The technology involved in delivering such solutions continues to evolve rapidly, and encompasses everything from advanced speech recognition to high-level digital security. But there are trends developing...
The rise of contactless
The fastest growing development in payment innovation at present is contactless. As of January Visa have mandated that deployment of chip and pin hardware must support fully contactless payments. While increasingly commonplace in card form, and adopted by Transport for London across the capital, the true explosion in use is coming from mobile phones, led by the UK launch of Apple Pay last July, available on the iPhone 6. It’s not the first mobile-backed contactless system - Android and Samsung have theirs - but the huge base of iPhone advocates has given it a significant head start.
The contactless transaction limit recently rose from £20 to £30, and paired with Apple Pay with a PIN or fingerprint, supports high value purchases over £30. Their aim is to see contactless payment completely replace the wallet. Ultimately the company views the Apple Watch as the true champion of contactless payment when the gruelling effort of reaching into your pocket for your phone is mercifully replaced with just waving your wrist in the general direction of the receiver.
While Near Field Communication (NFC) is the technology that makes most contactless payments possible, look out also for MST. Adopted by Samsung’s mobile payment system it mimics the magnetic strips used on cards, so opening up thousands of older point-of-sale terminals to contactless use. Contactless bracelets, watches, key fobs and more are likewise on their way.
Another growing trend is for payment apps that take out the ‘middlemen’ of credit and debit cards, effectively setting up mini bank to bank transfers. PayPal has been in the space for a while but there’s been a burgeoning of alternatives including Barclays PingIt and Zapp.
In another variation the use of secure digital ‘wallets’, allow customers to securely store their card details and re-use them on subsequent visits without re-entering their full card details.
Whatever the system or channel, it’s vital that any digital payments take place in a secure environment. The Payment Card Industry Data Security Standard (PCI DSS) exists to ensure organisations adhere to the highest levels of security. It is regularly refined and the latest version (3.1) is now in circulation covering new security standards for areas such as Point to Point Encryption (P2PE) to make it easier for merchants to adopt.
Demise of cash?
It remains to be seen how much longer we will continue to use cash – what is certain is that new technology is driving cash usage down. While there will inevitably continue to be some who ‘choose cash’ the convenience of electronic payments means it is increasingly the default option.
Meanwhile debate rages as to whether Bitcoin is dead….While virtual currency schemes such as this are not yet considered ‘real money’ from a legal perspective, they are substituting cold hard cash in certain payment situations and more than 500 different VCS now exist.
The European Central Bank consider that they can be useful in terms of financial innovation and provide a further payment alternative for consumers – but they don’t come without risk. Their official line is that they are ‘monitoring developments’. Likewise Blockchain - an underpinning technology that tracks and audits the movement of a digital entity, such as a VCS - could bring a new lease of life to loyalty schemes, allowing consumers to earn points and spend them in accepting locations. Time will tell.
While such developments may seem both challenging and fast moving, all this technology serves to remove barriers to payment, meaning individuals find it easier to pay, and have fewer excuses not to. Along with the associated benefits of reduced costs and improved service and profitability, this can only be good news for your bottom line.
Three advances making digital payment safer
Fingerprint scanning identity verification is now common place on mobile phones and a key advantage for the payment process. The next step in high-end biometric security is iris scanning technology - already featured in Fujitsu's smartphone.
Rather than transferring your actual card details, systems such as Apple Pay use digital tokens that represent the number. Your details are not stored on the phone itself, so not vulnerable in the case of theft.
Two factor authentication
An extra layer of security that often relies on a one-time password. It may be sent to you by text, generated by a programme such as the Google Authenticator app or constantly refreshed on free standing counter.