Good news: Technology is making payments faster, easier and more secure. Better yet, the user experience—the experience of your customer—continues to improve as bold & innovative solutions gain traction in the marketplace, thanks in part to new Payment APIs.
The trend toward faster and easier is certain to continue, as investors pursue innovative technological solutions in online and mobile payments, as well as other aspects of financial technology (Fintech). According to Statista, the total value of Fintech investments worldwide was $10 billion in 2014; by comparison, total investment is expected to be $43 billion in 2019 and $46 billion in 2020.1
What are we getting, collectively, for these tens of billions of dollars?
In the past year, we’ve seen tangible evidence of the coming revolution in biometrics, as well as movement towards the ability to skip the checkout line entirely, as is the case at the Amazon Go™ store in Seattle.
However, there are many tantalizing new developments on the horizon, some of which are likely to become more visible to you and your customers in 2019.
Next-generation payment cards
In the spring of 2018, the major credit card brands eliminated the signature requirement at the point of sale. Part of the rationale was to help speed the checkout experience. But the card brands also promised that there would soon be much better ways of confirming a customer’s identity.
To that end, both Mastercard® and Visa® have been running trials with biometric payment cards; consider, for example, the Mastercard Biometric Card, which uses an embedded sensor that authenticates identity via a fingerprint. Notably, “the cardholder’s biometric data does not leave the card at any point, as the biometric capture and match is done entirely on the card.”
According to Mastercard, this is a decidedly positive development for merchants, as the biometric card enables a “greater certainty of genuine cardholder identity during transactions,” and “increased revenue from reduced false declines or forgotten PIN transactions.”
The future of biometrics
Yet next-gen fingerprint cards are merely the tip of the proverbial biometrics iceberg. In fact, there are many more authentication tools that are poised to achieve widespread use.
In a recent interview with Biometric Update, Bob Reany, Mastercard Executive Vice President of Identity Solutions, opined that the financial payments ecosystem is now ready to “absorb” the new financial technologies that have been introduced in the past three years.2
And while fingerprint recognition technology will likely be the most commonly utilized biometric method in the next year, Reany believes iris recognition and facial recognition might ultimately become preferred methods of biometric authentication, in part because of user experience.
“When you pick up your phone, what do you do? You pick it up and you look at it,” he says. “If it’s doing an image process on me while I’m looking at it, that’s the best consumer experience possible.”
Looking further out into the future, it’s likely that biometrics will be combined with other fraud prevention tools that seem destined to make mobile device fraud increasingly difficult to perpetuate. Those tools could include things like “device identification, geo-location, and behavioral analytics,” says Reany, to name just three possibilities.
Hence the results of a new study by Juniper Research, which predicts that mobile biometrics will be used to authenticate $2 trillion worth of in-store and remote payments annually by 2023 (or 17 times the $124 billion expected in 2018).3 More specifically, “Juniper anticipates that over 80% of smartphones will have some form of biometric hardware by 2023…. This has traditionally meant fingerprint sensors, but facial recognition and iris scanning will become more prominent over the next 5 years.”
Pay as you go (in the car)
Another exciting development that is just around the corner is the ability of consumers to make payments from their Internet-connected cars. According to Statista, by 2020 98% of new cars will have Internet access.4
Visa, for one, has implemented a program called Visa Ready to help technology companies and device manufacturers offer secure payment experiences for the Internet of Things, “enabling anything from a watch to a car to initiate payments.”
Visa explains that it’s tokenization (turning an account number into a digital credential) that is the foundation for making payments via devices.5
It’s not difficult to see how the ability to pay from one’s car could improve the customer experience, with quick service restaurants and gas stations among the likeliest beneficiaries. Imagine, for example, the ability to pay for gasoline from a touchscreen in your car, eliminating the need to stand in line at a convenience store or the need to swipe a payment card at the pump.
Contactless Chip Acceptance Requirements
Speaking of swiping—or not swiping—another forthcoming development is the expected rise in consumer demand for contactless payments, which are enabled by Near Field Communication (NFC) technology.
The ability to “tap” to make a payment is not only faster than “dipping” a card; contactless payments will also increasingly give consumers the ability to choose how they make payments (with a credit card, their smartphone, their watch, etc.)
From the merchant perspective there’s a lot to like as well, as contactless payments eliminate minor frustrations associated with “dipping” (like premature card removal or bad reader connections). In addition, mobile apps like Apple Pay® use biometrics and tokens, enabling better security.
So while there is already a good business case for becoming “contactless capable,” there are also contactless chip acceptance requirements coming soon.
Visa has announced that “effective April 13, 2019, all terminals at U.S. merchant locations that accept contactless payments must actively support EMV®contactless chip functionality and the legacy magnetic stripe data contactless technology will be retired.”
In other words, if you accept contactless payments you will no longer be able to process those transactions as magnetic stripe transactions. Yet another more reason to make sure your business is already EMV compliant.
A&B can help
Now if this sounds like a lot of change, it is. But you don’t necessarily need to sweat the details, as your payment processor can help you incorporate new tools.
If you have any questions about how new and forthcoming technologies can benefit your business, don’t hesitate to give A&B a call at 888.330.3974