The Payments Revolution

From contactless to online payments, how we buy is changing


How many ways can people pay for things? A lot, it would seem. The idea of a payments revolution would have sounded silly 10 or 20 years ago when your options were restricted to cash, cheque, or card, but digital technology has made the phrase viable. Last year saw an explosion in contactless payments, as the introduction of Apple Pay and a huge growth in the of use contactless cards revolutionized the way we pay for things, and heralded a new era for the payments sector. However, it appears that we are only just scratching the surface, and there is still plenty of room for growth.

Wearables are the next big area for payments to move into. According to MasterCard, the volume of wearable payment transactions is expected to rise to $501 billion by 2020, as wearables shift from single-use to multi-purpose products. Apple Watch already has an Apple Pay feature, and now both Visa and MasterCard have announced new programs introducing tokenized payment features into products. Visa has already partnered with Swatch to introduce NFC-based payments in its line of analog watches, while MasterCard is being even more ambitious, working with a company called Wise Key to put payment technology into fashion products such as bags and watches. Wise Key has already started working with fitness trackers like Moov, but it is the idea of paying for things with a bag that will likely see a true test of our willingness to pay for things with random objects.

Sherri Haymond, senior vice president of Digital Payments and Labs at MasterCard, noted that: ‘Our collaboration with WiseKey is a great example of how payments functionality can deliver more value for a variety of device manufacturers, and create safe and convenient shopping experiences for their consumers.’

The payments revolution is not just about paying for handbags with other handbags though, it’s also changing how we withdraw cash. Both JPMorgan Chase and Bank of America have recently announced that they would be deploying cardless ATMs, allowing customers to use their smartphones to withdraw cash, cash checks, pay off credit card bills and request funds in specific denominations. BMO Harris, Avidia Bank and Salem Five Bancorp have also made similar moves.

Like any trend, it will not be universally accepted overnight. John Cooke, Commercial Director Card Services at allpay Limited warns that ‘change in payments is usually very slow… Contactless has been around since 2008 and it’s still not accepted in most supermarkets.’ People have understandable concerns around parting with their cash using their phone when it comes to security, and many still prefer paying with cash. Banks and FinTech firms are having to innovate more and more when it comes to customer verification. When Chip and PIN replaced magnetic strips in 2006, fraud cases dropped dramatically, although problems with CNP (card not present) transactions still remained. Fingerprints, biometric authentication, and facial recognition software, could help further reduce fraud. As of this summer, Canadian MasterCard holders with smartphones will be able to pay for their online purchases by taking a selfie or stamping their fingerprint on the phone, replacing pins and password. British bank HSBC also intends to introduce a similar program, allowing customers to access their accounts and process transactions via facial, fingerprint and even voice recognition.

Surveys have shown that the demand amongst customers for this technology is there, with 92% of participants agreeing that MasterCard’s Identity Check was more convenient than passwords, with 83% noting they believed it was more secure. With convenience now at the forefront of consumers’ minds, often outweighing consumer concerns, the payment industry must continue to innovate to serve these needs, and keep up with rapid evolutions in digital technology. However, they must always be aware of the security concerns, and ensure that the payments revolution is not allowed to grow out of its control. 

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