The Future Of Contactless Payments

Paying bills is no longer a contact sport.
Remember checks? Those handwritten pieces of paper with an irritating tendency to bounce used to be the main alternative to cash when it came to purchasing goods and services. Despite many acts of government regulating their usage, checks have been rendered obsolete by credit and debit cards – unheard of until the first Diners Club card debuted in 1950, yet now used to purchase everything from lattes to luxury cars.

The Evolution of Payments

The card in your wallet is as ubiquitous as checks were half a century ago, but there’s every chance those brittle plastic oblongs are themselves halfway to obsolescence. Contactless payments have become a popular method of modern retail transactions, with NFC built into the majority of modern debit cards and now accounting for one in ten card transactions. Smartphones are also increasingly being used to complete low-value sales, with 23.2 million people using contactless purchases in the US during 2015. While the global contactless payments market was worth $4 billion last year, its value is expected to reach $114 billion two years from now.

What’s Next?

While this is clearly a rapidly growing industry, the hardware chosen by consumers to undertake contactless payments is proving difficult to predict. Many industry observers thought the Apple Watch would spearhead contactless POS transactions, yet this device has been a commercial failure relative to other Apple product,s including the NFC-equipped iPhone. Wearable devices are likely to account for less than one in fifty non-card contactless payments by 2018, suggesting a widespread reluctance to progress beyond technology that’s stored in pockets and handbags.
If every Android and Apple phone will soon offer scope to complete contactless purchases at every till, there is clearly going to be a burgeoning market in phone theft. The devices themselves will have to improve their security by an order of magnitude, and one obvious way to achieve this is through fingerprint recognition or voice-activated unlocking. That would prevent bag thefts or muggings from facilitating low-value crime sprees, just as today’s three-swipes-and-you’re-out transaction limit stops someone endlessly using a stolen device. Mobile phone operators and banks will also have to refine the automated systems used to identify unusual behavior among their customers.

Body Language

Looking longer-term, biometrics will surely play an ever larger role in consumer shopping experiences. A smartphone in Japan can now be unlocked by scanning the iris of its registered owner, and there is a shop in China that has a database of customer eye scans linked to their bank details. Looking into a camera is enough to complete a purchase, which will sound highly appealing to anyone who’s ever struggled to find their debit card at the checkout or forgotten their credit card PIN while in a rush.
While biometrics would largely eliminate the risk of fraud or device theft, combined biometric and payment databases could inspire hackers and cyber-criminals to redouble their activities. It goes without saying that databases storing both biometric and financial information would require security far beyond anything available now; quantum computing’s vastly more advanced algorithms could potentially create unbreakable levels of security.
Instead of providing sensitive data to numerous retailers and websites, as we do with today’s debit card details, biometric information could be logged and stored at banks – institutions already familiar with providing cutting-edge security to their customers. Accounts hosted in this way could potentially be used around the world for the vast majority of transactions. A whole new generation may grow up understanding the importance of that first meeting with their local bank manager, even if the checkbooks of yesteryear are no longer handed out when a new account is opened…

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