The Future of Payment Technology

Woman scanning a phone for her payment.

Payment Technology is always evolving with its goal to make transactions as seamless and as easy as possible for a good customer experience.

Where is Payment Technology Going Next?

Here are some areas where the future of payments may very well lie:

  • EMV
  • Near Field Communication
  • Voice Commerce
  • Cryptocurrencies
  • Artificial Intelligence

What is EMV?

EMV® developed and managed by American Express, Discover, JCB, Mastercard, UnionPay, and Visa — is a global standard for credit cards that use computer chips to authenticate (and secure) chip-card transactions. EMV chips encrypt bank information making it far more secure than the old magnetic-stripe cards. If you live or travel to Europe you will know that EMV has been in use for over a decade (it actually began in France in 1992). In the US, however, it has not been prevalent for nearly as long. The United States is switching to chip cards in an effort to rein in credit card fraud. Even though the United States has a quarter of the world’s credit card transactions, almost half of the world’s credit card fraud happens here.

The biggest roadblock to more widespread acceptance in the US is the cost of EMV-capable hardware. But faced with credit card fraud targeting magnetic stripe cards, it is only a matter of time before the US catches up to the level of acceptance for EMV payment technology already found in Europe. Financial data is more secure on a chip card because it deals with dynamic authentication, that is, the data is constantly changing. This makes it hard to isolate and even if someone intent on fraud could access the data, it is encrypted. Magnetic-stripe cards on the other hand, only have static data which can be copied with an inexpensive card skimmer device in order to create fraudulent cards.

Near Field Communication

Near Field Communication or NFC, is the ability to make a contactless payment using a phone or tablet waved near an NFC-capable reader. There are three distinct modes in which NFC is used.

  • Card Emulation – In this mode, the customer device acts as a contactless smart card with an external reader which means that hardware does not need to be replaced. With an existing NFC compliant infrastructure, two-way communication can be established. For example, if a passenger pays for a ticket and boards the plane, NFC enables the system to also update the seating arrangements or reward the passenger with the allotted frequent flier miles.
  • Peer to Peer – This mode allows two NFC-enabled devices to communicate with each other in order to share information or files. For example, users at a networking event can share contact information. So say goodbye to printed business cards!
  • Reader/Writer Mode – Reader/writer mode allows NFC-enabled devices to read information that is stored on NFC tags embedded in posters and displays. So for example, you can use this mode to get timetable information for mass transit or take advantage of special offers in marketing collateral.

Voice Commerce

A new trend is becoming known as voice commerce or audio wallet. Any action in the past that involved a search engine can now be done with the voice taking advantage of Artificial Intelligence (AI). It utilizes software that gives the consumer the choice of voice as an alternative to a mouse and keyboard.

In 2016 in the United States, Amazon sold eight million Echo devices that are voice-activated. Microsoft’s voice assistant, named Cortana, currently has 133 million monthly users. You can hardly get through your favorite TV show or sports event without seeing an ad for one of these devices, especially during the holiday season.

Here are some additional statistics. According to Comscore by the year 2020 – half of all online search queries will be voice-based.

Smartphone sales have dropped off, but using them and other voice-activated devices, such as Google Voice, Apple AirPods and Android mobile apps for ordering by voice is taking off. Voice commerce makes it so easy for consumers to purchase, it holds great promise for gains for retailers, both online and offline. Amazon has noted that voice commerce has increased the size of an order by about 10%. That is good news for retailers.

So wherever you can use your smartphone you can use voice commerce. Lying in bed, working out at the gym, or coming to a standstill in your commuter traffic (provided its legal to use your phone in the car!) are just some examples.

So what kind of devices do consumers use to make their purchases? Not surprisingly, 81% use a smartphone, 25% use smart speakers, and 21% use some sort of device that is not a phone but that has a screen.

What kind of activities do consumers perform using voice commerce? 82% of users were looking for general information such as weather or news. 67% use voice to play videos and music. And 35% use voice commerce to make purchases.

Cryptocurrencies

Simply put, a cryptocurrency is a digital or virtual currency designed to work as a form of exchange. The “crypto” part of the name refers to it using cryptography to secure and verify transactions. During the tech boom of the 1990s, several attempts were made to create virtual currency. Unfortunately, none of the companies succeeded due to fraud and other financial difficulties. In 2009 Bitcoin was created by an anonymous group of programmers, instead of using third-party entities to keep track of transactions and balances. Therefore, those entities had access to your account balance and transactions. In the peer-to-peer world of cryptocurrencies, every transaction file contains the sender’s and recipient’s public keys (wallet addresses) and the number of coins transferred. The sender of the funds also needs to show approval of the transaction.

So what can you do with a cryptocurrency? Unlike a few short years ago, there are now merchants willing to accept cryptocurrencies such as Bitcoin. Both online and brick and mortars accept it as a method of payment. Bitcoins can be used to pay for hotels, flights, jewelry, apps, and computer parts to name a few. Other cryptocurrencies are also gaining in popularity. Apple is leading the charge by accepting 10 forms of cryptocurrencies for payment in its Apple stores. You can also invest in cryptocurrencies although you need to recognize that this is a high-risk investment.

Artificial Intelligence

Artificial Intelligence (AI) is a much-bandied-about phrase. What does it mean? By definition, artificial intelligence (AI) is any device that can mimic cognitive functions like that of a human mind in order to accomplish a task. Or put more simply, AI is a machine that can problem solve to achieve an end goal.

Human decision-making is being replaced by computers and software in almost every aspect of life. All one has to do is think of Google and its fleets of self-driving cars. Then there are self-setting thermostats, self-driven vacuums, and digital personal assistants to perform all sorts of tasks.  But how does this affect payment technology?

Today, of course, you have to call a merchant to place an order or go to a brick and mortar in person with cash or credit card in hand. Even when you show up at the store, the owner has no clue as to who you are, how often you shop there, what you typically purchase, and above all how much you typically spend.

So what will the future look like? Personalization is the key. When you enter the store, the merchant will know who you are and what your preferences are. Because your identification has been verified and your payment credentials are stored securely on the cloud, any transaction will become “frictionless” (less friction, more enjoyable shopping). You get a good customer experience and the merchant comes away with a better understanding of who the customers are.

We have described possible trends in the future of payment technology. It is a fascinating subject to watch how the changes in technology impact our personal, daily lives and will continue to do so in the future.

ID TECH is a leading payment peripheral provider with a magnetic stripe, EMV contact, and EMV contactless expertise. It was established in 1985 in California and opened its Asia headquarters in Taiwan in 2016. For more information about its mobile transaction payment product, visit https://idtechproducts.com.

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