Fintech Trends: The Future of Contactless Payment Technology
Over the last few years, financial technology has revolutionised how people pay for goods and services. Contactless payment technology is one of these advancements, which is becoming increasingly popular, with mobile payments such as Apple Pay and Google Pay joining in alongside contactless credit and debit cards.
The convenience of contactless payment technology has made it an easy way to make purchases without dealing with the hassle of pulling out cash. This article explores the potential of contactless payment technology and where it may be heading in the future.
The rise of contactless payments and a cashless society
Contactless payment technology is a unique advancement that has completely changed how people transact for goods and services on the go. With the popularity of mobile payments, contactless credit cards and other payment systems taking off in recent years, it is clear that this trend will not be slowing down anytime soon.
According to a recent report by investment management firm Bailard, "In recent years, we have seen rapid global adoption of a superior form of digital payments: contactless payments (also known as “contactless”, “tap to pay”, “NFC payments”). Currently, consumers interact with contactless payments through two primary forms – contactless-enabled credit and debit cards, and mobile wallets (such as Apple Pay, Google Pay, and Samsung Pay)."
The steady reduction in the number of cash points and the shift towards online banking and modernised payment processes, according to Michael Schrezenmaier, CEO Europe at SumUp, has accelerated the move toward a cashless society in recent years. He said, "There's no doubt that some of the biggest innovations in regards to merchant products and services being utilised in the industry have been around contactless payment solutions. What's more, the onset of COVID-19 and the need for merchants to respect social distancing measures and health guidelines put in place by the government has meant that this reliance on contactless payment solutions has become even more important over the past 18 months."
A cashless society has many benefits for both individuals and businesses. From an individual perspective, it is much easier to make purchases without physically carrying cash around when they are out shopping or dining at a restaurant. Furthermore, making payments in this way prevents the risk of losing money if their wallet is stolen while on the go. It also goes a long way in terms of tracking payments so law enforcement agencies can easily identify individuals who are involved in illegal activity.
The significant increase in contactless payment technology also benefits businesses. For example, with the rise of mobile payments systems such as Apple Pay and Google Pay, retailers are finding it much easier to accept card transactions on the go without the need for an expensive payment terminal or contactless terminal machine. As well as this, the time it takes to make payments is much faster than paying with cash or cheques and there's no need for change when making small purchases.
The difference between contactless cards and smartphones
There are three main differences when it comes to NFC on a powered device such as a smartphone over contactless cards, according to Dickson Chu, CEO at Copper and a former Managing Director at Citibank;
- 1) Peer-to-peer, so two NFC-enabled devices can establish a connection and share data;
- 2) Read/write, so an active device such as a phone can pick up data from a passive device without the capability of reading information itself, such as a contactless piece of plastic;
- 3) Card emulation, so people could create digital copies and reproductions of physical cards.
This difference means smartphones hold a lot of potentials when it comes to playing in this space. With the rise of smartphones and mobile devices, there is a lot more opportunity for unexpected use-cases of contactless payment technology.
In terms of security, with card emulation on Android devices, users get all the benefits that come from physical cards (such as tokenisation) without the drawbacks. For example, unlike contactless cards where people are limited to certain types of payments or have restrictions on how much they can spend per transaction, there is no such limitation with mobile devices.
The future of contactless payments
According to Greg Goldfarb, VP of Commerce Products at GoDaddy, "Although many social distancing restrictions have eased, in the last two years, consumers developed new habits that have become expectations for how they shop —one, in particular, is a shift to contactless payments like Apple Pay and Google Pay. Consumers are becoming a lot more comfortable relying on a digital wallet and reducing the usage of their physical credit cards."
While there have been many advancements in contactless payment technology in recent years, this is just the beginning of what seems to be a considerable shift towards cashlessness. As society becomes more reliant on mobile devices and contactless payment solutions are integrated into everyday life, it will not be long until we enter an era where physical money feels antiquated.
"The push from regulators to go cashless will speed ahead, and we're certain to see the continued closure of branch banks in small towns across Europe, eliminating easy access to cash, and further reinforcing the reliance on contactless payment solutions. Concurrently, as consumer behaviours keep demanding better and more innovative products, as well as the continued growth of ecommerce, we're likely to see a wider variety of mobile payment solutions, such as further NFC-enabled payment trends (such as wearable payment devices like watches and rings), in addition to innovations in QR code payments," adds Schrezenmaier.
In summary, the future of contactless payment technology is bright, and it seems these innovations will only continue to grow into the foreseeable future. With many people already preferring digital forms of payments to card transactions, the fact that there are now more contactless payment terminals than ever before is just another step in this process. As well as this, with new developments such as Apple Pay moving to a cashier-less store concept which does not require any NFC hardware at all but instead uses Bluetooth technology and facial recognition software means people could be living in a cashless society in a matter of years.