From Contactless to Biometrics: How Card Payment Innovations Are Redefining Transactions
Back in the late 80s, when I was a college student in the US, paying for my groceries at the supermarket was such a hassle... If I didn't have cash, I had to use a cheque to pay, and without a local ID, I had to get my fingerprints taken on the back of the cheque for each purchase to verify its legitimacy and reduce the risk of fraud. Looking back, I can't believe how crazy and unsafe that was! The process was time-consuming, costly, and fraught with the possibility of identity theft or fraud. Fortunately, with the advancement of technology, particularly the use of cards, payments have become more secure and convenient for both businesses and customers.
As the world continues to embrace digital transformation, accelerated by the COVID-19 pandemic, payment cards are rapidly evolving to keep up with the changing times. The future of payment cards is poised to be an exciting one, with innovative technologies and services being developed every day. For businesses and customers, it's essential to stay informed about the latest payment card trends and to understand how to prepare for what's ahead. In this article, I will discuss the future of payment cards and how businesses and customers can prepare for it.
Contactless Payments
A contactless card payment allows customers to make purchases without physically swiping or inserting their payment card. This technology was first introduced by Philips in the late 1990s, under the name "Proton". However, the technology did not take off until the early 2000s when Mastercard introduced its "PayPass" system (2003), and Visa introduced its "PayWave" system (2005). Since then, contactless payments have become widely adopted around the world and are now offered by most card issuers. Contactless payments work through a chip in the payment card that uses radio frequency identification (RFID) to communicate with the payment terminal, allowing for a fast and secure transaction.
These payments are becoming increasingly popular, and the trend is set to continue. According to data from Juniper Research, contactless payments are expected to reach $10 trillion globally by 2027. The trend towards contactless payments is driven by convenience and speed, making it easier for customers to complete transactions quickly and efficiently.
Businesses can prepare for the rise of contactless payments by ensuring they have the necessary hardware to accept them. For instance, businesses can invest in contactless payment readers or point-of-sale systems that support these transactions. They can also offer incentives to customers who pay with contactless payments, such as discounts or rewards.
Mobile Payments
A mobile payment allows customers to pay for goods and services using their personal mobile devices.
The first mobile payment in history was made by The Coca-Cola Company in 1997. The company installed vending machines in Helsinki, Finland, that were equipped with the ability to accept payment via SMS text message. Customers could send a text message to the vending machine with the code for the beverage they wanted to purchase, and the vending machine would dispense the drink.
This early mobile payment system was limited in its capabilities, as it required a specific type of mobile phone and a pre-registered account with the Coca Cola company. However, it was a significant milestone in the history of mobile payments, as it demonstrated the potential for using mobile devices to facilitate payments.
Nowadays, mobile payments work by using a mobile payment app to connect to the payment terminal and process the transaction. Users can also choose to link their payment card to the app to complete the transaction.
Mobile payments are rapidly gaining popularity and are expected to surpass card payments by 2024, according to the latest estimates by payment processor Worldpay. This trend is driven by the convenience and speed of mobile payments, allowing customers to pay for goods and services using their mobile devices. Also, according to a Juniper Research report, 99% of smartphones globally will be capable of making contactless payments by 2027.
Businesses can prepare for the rise of mobile payments by accepting mobile payment options, such as Apple Pay, Google Wallet, and Samsung Pay. They can also develop their mobile payment applications to provide customers with a seamless payment experience. For instance, businesses can offer mobile payment options for online purchases and in-store transactions, allowing customers to choose the payment method that best suits their needs.
Biometric Authentication
Biometric authentication was first introduced for payment security in the early 2000s by Fujitsu, who developed the first payment system that used finger vein scanning to authenticate users, and implemented it in a payment system used by the Ogaki Kyoritsu Bank Ltd in Japan.
Since then, this technology has become increasingly popular, providing an additional layer of security for customers. It is a method of verifying a person's identity based on unique physical features, such as fingerprints, facial recognition, or voice recognition. Biometric authentication works by using sensors or cameras to capture the user's biometric data, which is then compared to the stored data on the payment card or in the payment system. If the biometric data matches, the transaction is approved, providing a fast and secure payment experience.
As an example, a study by Mastercard has found that 76% of its customers in the Asia Pacific region were interested in using biometric technology such as fingerprint scanners or facial recognition to make payments. Another study by Accenture found that as many as 35% of consumers in the US and Canada were interested in using voice-activated payments.
Some steps merchants could take to prepare for these new biometric authentication technologies would include:
Understanding the technology: Merchants should take the time to learn about the different biometric authentication technologies available, such as facial recognition and fingerprint scanning, and understand how they work. This will help them make informed decisions about which technology to use and how to implement it.
Evaluating their payment system: Merchants should evaluate their existing payment system to determine whether it can support biometric authentication. If not, they may need to upgrade their payment terminals and software to ensure they are compatible with biometric authentication technologies.
Investing in data security: Biometric authentication relies on collecting and storing sensitive data, so merchants must take data security seriously. They should ensure their payment system is fully compliant with data protection regulations and invest in the latest data security technologies to protect their customers' data.
Training staff and customers: Merchants should train their staff and customers on how to use biometric authentication technologies, including how to enroll and authenticate their biometric data. This will help to ensure a smooth transition to biometric authentication and minimize any confusion or errors.
Offering alternative payment options: While biometric authentication is becoming increasingly popular, not all customers may be comfortable using this technology. Therefore, it's important for merchants to offer alternative payment options to accommodate all customers' preferences.
Overall, by taking these steps, merchants can prepare for the rise of biometric authentication in payments and ensure they are providing a secure and convenient payment experience for their customers.
Blockchain and Cryptocurrency
Blockchain and cryptocurrency technologies are also set to have a significant impact on the future of payment cards.
Blockchain technology was first introduced in 2008 as part of the implementation of the cryptocurrency, Bitcoin. The concept of blockchain was initially proposed by an anonymous individual or group of individuals using the pseudonym Satoshi Nakamoto in a white paper titled "Bitcoin: A Peer-to-Peer Electronic Cash System." The white paper described a decentralized digital currency system that would use a public ledger to record all transactions in a secure and transparent way, without the need for intermediaries such as banks or payment processors.
Blockchain technology is the underlying technology that enables the secure and decentralized storage of transaction records, using a network of nodes that validate and store transactions on the ledger. Since the introduction of Bitcoin, blockchain technology has been used for a wide range of applications beyond digital currency, including supply chain management, healthcare, and voting systems, among others.
Payment card companies are now exploring the use of blockchain technology and cryptocurrency to improve payment security and speed.
Businesses can prepare for the rise of blockchain and cryptocurrency by accepting cryptocurrency payments or investing in blockchain-based payment platforms. For example, a business can choose to accept payments in Bitcoin or other cryptocurrencies, allowing customers to pay using the digital currency of their choice.
Artificial Intelligence
Artificial intelligence (AI) is rapidly transforming the card payment industry, both for merchants and customers. AI-powered solutions are making payments faster, more secure, and more personalized, while also reducing the risk of fraud and increasing revenue for merchants.
One of the primary ways AI is transforming the card payment industry is through fraud detection and prevention. AI-powered algorithms can analyze large amounts of data from different sources in real-time, allowing them to quickly detect fraudulent transactions and prevent them from being processed. This not only reduces the risk of fraud but also provides customers with a more secure payment experience.
Another way that AI is transforming the industry is by improving the checkout experience for customers. AI-powered solutions can analyze customer data and create personalized offers and promotions, making the checkout experience faster and more convenient. This also helps merchants to build better customer relationships and increase revenue by encouraging repeat business.
In addition to these benefits, AI is also transforming the way payments are processed. For example, AI-powered chatbots can assist customers with their payment inquiries and provide them with real-time support. This makes payments more efficient and convenient, while also providing merchants with valuable customer insights.
New Payment Card Technologies
New payment card technologies, such as wearables, voice-activated payments, and connected car payments, are set to revolutionize the payment card industry.
The first wearable device used to make a payment was the Pay-by-Thumb system developed by Watchdata Technologies in 2003. The device was a smartwatch with a built-in fingerprint scanner that allowed users to authenticate their identity and make payments using their thumbprint.
While the Pay-by-Thumb system was an early example of a wearable device used for payments, it was not widely adopted, and the technology was not yet mature enough to support widespread use. Since then, wearable payment technology has evolved significantly, providing a convenient and secure payment option for customers. Other less known devices which could become popular to make payments are (i) Smart rings: they typically support contactless payments and can be used to make payments at a point-of-sale terminal; (ii) smart glasses: typically support augmented reality, and payments can be made by looking at a point-of-sale terminal; and, (iii) smart clothing: the clothing is embedded with sensors that can be used for contactless payments.
Businesses can prepare for these trends by investing in tools that support these new payment card technologies. For instance, businesses can choose to accept payment cards with built-in contactless payment capabilities or invest in accepting wearable payment technology, such as smartwatches or fitness trackers. By staying up-to-date with the latest payment card trends and technologies, businesses can provide their customers with a seamless payment experience that is tailored to their needs.
The Importance of Security
As payment card technology evolves, security will continue to be a major concern for businesses and customers alike. It's crucial for businesses to stay informed about the latest security threats and to take steps to protect their customers' payment data.
For more information on the trends and how to protect your business, I invite you to read "Scam-proof Your Business: Strategies for Preventing Card Payment Fraud" https://www.linkedin.com/pulse/scam-proof-your-business-strategies-preventing-card-payment-amoedo/
Businesses can prepare for the future of payment cards by investing in payment card technology that is designed with security in mind. For example, businesses can choose to accept payment cards with built-in security features, such as tokenization or biometric authentication. They can also invest in payment card technology that is designed to detect and prevent fraud, such as AI-powered fraud detection systems.
For customers, it's important to take steps to protect their payment card data. This includes regularly monitoring payment card statements for fraudulent activity, choosing strong passwords for payment card accounts, and avoiding sharing payment card information with third-party websites.
Conclusion
The future of payment cards is set to be an exciting one. From contactless payments to mobile payments, biometric authentication to blockchain and cryptocurrency, the payment card industry is evolving at a rapid pace, with innovative technologies and services being developed every day. By staying up-to-date with the latest payment card technologies and trends, businesses can be well-prepared for the future and provide their customers with a secure and efficient payment experience that is tailored to their needs.
References:
Accenture: https://www.accenture.com/us-en/insights/technology/mobile-payments-consumer-survey
Biometric Update: https://www.biometricupdate.com/201908/history-of-biometrics-in-payment
The Balance: https://www.thebalance.com/a-brief-history-of-mobile-payments-4169976
The Asian Banker: https://www.theasianbanker.com/updates-and-articles/mobile-payments-to-overtake-cards-by-2024
The Coca Cola Company: https://www.coca-colacompany.com/stories/history-of-mobile-payments
Electronic Payments International: https://www.verdict.co.uk/electronic-payments-international/features/contactless-payment-technology/
FindBiometrics: https://findbiometrics.com/ogaki-kyoritsu-bank-japan-to-deploy-fujitsu-biometric-technology-9173/
Fujitsu: https://www.fujitsu.com/global/about/resources/news/press-releases/2001/0925-01.html
Juniper Research: https://www.juniperresearch.com/press/press-releases/voice-assistants-used-to-complete-$80bn-in-purchases
Juniper Research: https://www.juniperresearch.com/pressreleases/contactless-payments-transaction-values-to-surpass
Mastercard: https://newsroom.mastercard.com/asia-pacific/press-releases/76-of-asia-pacific-consumers-want-biometrics-as-a-way-to-pay/
Mastercard: https://www.mastercard.us/en-us/about-mastercard/what-we-do/contactless.html
PYMNTS: https://www.pymnts.com/connected-cars/2021/what-it-will-take-to-drive-connected-car-payments/
PYMNTS: https://www.pymnts.com/mobile-payments/2017/mobile-payments-20-years-later/
TechCrunch: https://techcrunch.com/2014/08/09/the-history-and-future-of-wearable-payment-technology/
TechRadar: https://www.techradar.com/news/contactless-payment
Visa: https://www.visa.co.uk/about-visa/newsroom/press-releases.2129311.html
Visa: https://usa.visa.com/pay-with-visa/contactless.html
