5 Key Payment Technology takeaways from 2015


Paresh Banerjee

Executive Director, Opus Consulting


EMV, NFC and Tokenization takeoff

With the Liability shift kicking in on 1st Oct in the US, the retailer community has rolled out EMV based POS systems. Many large retailers like Home Depot, Walmart, Macy’s have started accepting EMV based chip cards. The EMV card stores the card information in an embedded chip on the card, instead of the Magnetic stripe, making it difficult to steal. It also follows a protocol of verification and authentication at various levels – card, terminal and issuer making it extremely difficult to replicate.

NFC (Near Field Communication) is a technology that enables proximity based contactless transactions possible. It supports both proprietary and contactless EMV options. It works with a consumer owned contactless card, fob, mobile phone or tablet and a NFC enabled POS device. NFC defines the transmission protocol between the two devices.

Tokenization is a method of substituting the sensitive Card data such as the PAN number by a Token, a unique, random number. The original data(PAN) could be regenerated by using the right decryption keys. This technology alleviates the need for sensitive card data to be stored with the merchant, retailers, wallet providers. They can use the Tokens to transact on behalf of the consumer, without knowing the actual card details.

These 3 technologies found mass acceptance in 2015. The important thing to note is that the above technologies are mutually exclusive and can be used in any combination to provide maximum security to protect consumer’s card information.

Wallets maturing

The fight to replace your leather wallet is on. Since Apple Pay, a host of new entrants like Android Pay (replacing Google Wallet), Samsung Pay (enabling contactless payment using Mag stripe card on non NFC based POS terminals), Retailers led Merchant Customer Exchange’s Current C and Chase Pay have joined the race; each bringing their own unique value proposition.

Basic feature of a Wallet is to store information related to payment cards in a secure, digital environment and use it to make payments electronically. These could be for purchases made at a store, online or in-app.

With most features being same, differentiation amongst wallets comes through value added features like Loyalty, Rewards, Promotions, Coupons etc. Wallet providers like Google are providing APIs to help integrate their payment functions into 3rd party solutions.

Bitcoin waning

A non-federated mathematically generated digital currency. Bitcoin’s image suffered considerably due to FBI’s exposure of it being used to transact on the online black marketplace Silk Road to purchase drugs, weapons etc. Also the Mt. Gox exchange collapse due to theft of close to $400 Million worth of bitcoins has left the financial community wary of its viability.

The price of Bitcoin, currently around $500, is subject to volatility ranging from $1200 in 2013 to $100 in 2014. Also there is a limit of 21 million bitcoins that can ever be created.

All these issues have left the financial communities a bit wary of the viability of bitcoin in the long run. At the same time there is a lot of investment that has gone into funding companies around these technologies. The future of bitcoin lies in its proponents addressing the issues surrounding the theft, volatility and potential misuse by the uncharted.

Blockchain waxing

Blockchain is the backend technology for recording Bitcoin transactions. It is a distributed ledger that provides an accurate, immediate record of every bitcoin transaction that takes place. This year saw the delinking of the two. Blockchain removes the need of a central authority or a bunch of middlemen to authorize a transaction.

Financial institutions like Barclays, Banco Santander, Citibank, UBS are looking at leveraging the potential of Blockchain to speed up transaction processing and lowering the cost of settlement. Sale and transfer of any assets like stocks, insurance policies, auto and land titles, event ticketing etc. are all being considered for tracking through the Blockchain mechanism. Overstock.com, one of the early acceptors of bitcoins is starting a Blockchain based stock exchange t0.com to trade digitized securities.

IoT with Integrated payment – possibilities galore

The Internet of Things (IoT) is here. Integrating payment functionality into IoT devices are the next steps. General Motor’s key fobs can help you pay for your Starbucks coffee and order pizza on your way home, using MasterCard’s technology. Nest labs, acquired by Google and a forerunner in the IoT space, has an intelligent thermostat and smoke detector that can be remotely controlled through a mobile phone. Loading payment information into such a device could enable automatic utility payments. Stop and Shop supermarkets is introducing intelligent carts that could calculate the price of items added to card and enable a swifter checkout experience. Technology companies are dabbling with usage based payment systems, like gym charges based on machine usage.

With CISCO’s estimate of 50 billion IoT devices by 2020, sky is the limit for integrated IoT payment innovations.

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