The COVID-19 pandemic has made us more inclined toward digital payments, shying away from the exchange of hard currency due to our newfound hygiene awareness; it is here that contactless payments have quickly become the new norm.
In Europe, Germans are increasingly ditching cash for hygiene reasons, according to Initiative Deutsche Zahlungssysteme e.V, a payment industry organization. In the U.S., more than 50 percent of consumers say they want to stop using cash in favor of debit cards, according to data from California-based Travis Credit Union.
Payment firms are being pushed rapidly into transformation, even as they handle larger transaction volumes, face increased competition and heightened risk factors amplified by COVID-19, according to the World Payments Report 2020 published by Capgemini.
The report predicts that a compound annual growth rate (CAGR) of 12 percent is expected for global non-cash transactions for 2019 to 2023.
Global non-cash transactions surged nearly 14 percent from 2018 to 2019 to reach 708.5 billion transactions, the highest growth rate recorded in the past decade. Asia-Pacific surpassed Europe and North America to become the 2019 non-cash transactions volume leader at 243.6 billion.
The increase was driven by increasing smartphone usage, booming e-commerce, digital wallet adoption and mobile/QR-code payments innovations, led by China, India, and other SE Asian markets (31.1 percent growth).
Last year, nearly 48 percent of in-person Visa transactions were contactless, a figure that is more than likely to rise as an indirect result of the Coronavirus pandemic, Visa reported.
What is a contactless payment?
According to the Secure Technology Alliance (STA), a contactless payment is a payment transaction that does not require physical contact between a consumer’s payment device and a point-of-sale (POS) terminal.
“The consumer holds a payment device (such as a contactless or dual-interface chip card or mobile device) in close proximity to the terminal (less than 1-2 in. away), and payment account information is transmitted wirelessly, over radio frequency (RF),” STA explained.
The consumer’s contactless payment device can assume a variety of form factors, including cards, Near Field Communication (NFC)-enabled smart phones, and wearables. Contactless transactions generate a unique code for each transaction.
What are the risks?
However, with any technological advancement, comes a cybersecurity risk.
The main weakness coming out of contactless payments won’t happen in cyberspace but rather in person. Since the payment method doesn’t require a PIN, a lost credit card or stolen device would allow a criminal to have easy access to your account.
Thus, a smartphone without the necessary security features would easily allow hackers to ring up purchases without detection; and because many of these transactions happen without a receipt, it is difficult for the owner to prove the charges were fraudulent.
Contactless credit cards use radio frequency identification (RFID) to transmit the data, and hackers have been successful in making fake scanners or using card skimmers designed to steal data transmitted via RFID.
If a hacker gets the information from the card or wallet, they can create cloned cards. Mobile wallets, on the other hand, rely on near-field communication (NFC) that transmits data within a very close range.
How are contactless payments safe?
Contactless payments remain one of the most secure ways to conduct financial transactions due to the use of RF technology to send payment account information to the merchant’s POS terminal, instead of requiring the payment card’s chip to be inserted or magnetic stripe to be swiped.
“Contactless payment devices are designed to operate at very short ranges – less than 1-2 inches – so that the consumer needs to make a deliberate effort to present the card or mobile device to the POS reader to initiate the payment transaction,” the report by STA further added.
In parallel, the financial payments industry has designed various layers of security throughout the traditional credit and debit payment systems to protect all parties involved in the payment transaction.
“Most of these protective measures are independent of the technology used to transfer the consumer payment account information from the payment card or device to the merchant POS terminal (i.e., swiping, inserting, or tapping) and are used for EMV chip, magnetic stripe, and contactless transactions,” the report highlighted.
The financial industry uses advanced security technologies both on the contactless device as well as in the processing network and system to prevent fraud. There are different ways financial companies can keep you safe according to the STA:
- Industry standard encryption: Each contactless device must have its own unique secret key that uses standard encryption technology to generate a unique card verification value, cryptogram or authentication code that exclusively identifies each transaction. No two devices share the same key, and the key is never transmitted.
- Dynamic data: Every contactless payment transaction includes dynamic data that is unique for that transaction. Stolen or intercepted transaction data can’t be used for other transactions.
- Authentication: The issuers verify that the contactless payment transaction has a valid card verification value, authentication code or cryptogram before authorizing the transaction. Therefore, at the system level, issuers have the ability to automatically detect and reject any attempt to use the same transaction information more than once.
- Confidentiality: The processing of contactless payments does not require the use of the actual cardholder name in the transaction. In fact, best practices being used within the industry do not include the cardholder name in the contactless chip.
- Control: Cardholders control both the transaction and the contactless device throughout the transaction. Cardholders do not have to hand over either a device or their account information to a clerk during a contactless transaction.
The impact of 5G
There is no doubt that the fifth generation of mobile networks will heavily impact the digital payments industry, from faster confirmation speeds, to being able to make larger payments online.
There are four main ways that 5G will impact digital payments according to U.S.-based ISP, Fastmetrics:
- One-to-one payments: Mobile payments and mobile banking are expected to grow rapidly across the world thanks to the easy access they provide to regions which are out of reach for traditional banking methods.
With 5G speeding up data up to 3 times as compared to the current 4G network, the overall consumer transaction experience will be improved leading to more and more people relying on mobile payments.
Even the exchange of a minor sum of money between friends, will take place via mobiles.
- Contactless and Retail Payments: Facilitated by digital technology, retailers would be able to provide a smarter and more customized payment process to its consumers both online and in-person.
Due to the high speed connections, consumers would be able to browse through online catalogues. Then apply filters, select, and even try their purchases virtually, before paying for them. All within a matter of minutes. This would lead to a further growth in retail and online payments.
- Big-Ticket purchases: Purchasing big-ticket items like cars or homes, often require lengthy processes. This can take loan application processing, to credit check and finally loan activation and disbursement.
5G would help banks combine user data and artificial intelligence in real time to speed-up the end-to-end experience. High resolution streaming capabilities will enable customers to interact with financial consultants giving them more confidence before making any decisions.
- Transaction Security: 5G will enable the use of multi-modal bio-metric authentication features that rely on different characteristics of a person’s physiology and/or behavior.
Large amounts of bio-metric data are usually required for authentication. This data then needs to be sent to matching engines which analyze patterns in this data.
With the many technological advancements being developed, it is almost certain that the fourth industrial revolution will change how we make our payments, removing the need for hard currencies as all monetary transactions will switch to numbers on a screen.
Mastercard, Geidea team up to bring contactless payments to Saudi Arabia
Global financial services company Mastercard, and Geidea, the largest fintech company in Saudi Arabia by market share, announced earlier this week a strategic partnership agreement to accept Mastercard payments using a Tap-on-Phone solution in Saudi Arabia.
Geidea is the first fintech company to roll out contactless payments acceptance technology across the Kingdom, which will enable businesses to use smartphones as payment acceptance devices.
Tap-on-Phone is an innovative, intuitive, and cost-effective app-based solution that allows small businesses to quickly embrace electronic acceptance through their smart mobile or tablet device.
With smart phone penetration of more than 70 percent in the Kingdom, Tap-on-Phone has the potential to reach over 300,000 small and medium enterprises (SMEs) and merchants in the first year alone.
“The COVID-19 pandemic has forced a shift in consumer behavior towards digital and contactless payments channels, making it imperative for businesses to adapt and shift to a more online based model. We are therefore proud to partner with Mastercard and provide businesses with a relevant solution that offers the ability to accept safe, secure and seamless contactless payments through Tap-on-Phone technology,” said Abdullah Al-Othman, the Founder and Chairman of Geidea.
Presently, the Geidea network provides payment and e-commerce solutions to more than 100,000 merchants – covering 600,000 payment terminals and ATMs within the Kingdom.
As one of the many use cases, Tap-on-Phone enables more SMEs to accept secure card payments on delivery, in lieu of cash-on-delivery (COD) which is often the only on-delivery payment option.
According to Bain.com, around 62 percent of MENA online shoppers choose COD as payment method when buying online, compared with less than five percent in the UK and France. Cash conversion is key to developing a new payment landscape and improve consumer experience.
“Through our partnership with Geidea, we can help small businesses expand their ability to accept digital payments and grow their earning potential. The solution will also help Saudi Arabia to transition safely into a secure digital payment ecosystem, without the risks associated with a large cash pool,” said J.K. Khalil, Country Manager, Saudi Arabia, Bahrain & Levant, Mastercard.
Tap-on-Phone makes it easier for SMEs to use their compatible smartphones to accept quick, easy, and secure, payments from their customers for goods or services. It saves businesses money and time, because all they need to receive electronic payments is an NFC-enabled Android device on version 7.0 or newer.
Geidea also recently became the only non-bank institution in Saudi Arabia to be granted an acquiring license from Saudi Central Bank (SAMA). The license enables the fintech company to process secure, fast, and seamless end-to-end payment solutions directly to merchants.
Facial recognition for payments to reach 1.4 billion users by 2025
Contactless payments have been one of FinTech’s most prized innovation, silently growing in popularity within all types of commerce and shopping, with the pandemic skyrocketing its adoption across the board.
As such, facial recognition for payments is on track to become the new norm of payment methods as the number of users of software-based facial recognition to secure payments will exceed 1.4 billion globally by 2025, from just 671 million in 2020, a new study by Juniper Research found.
This rapid growth of 120 percent demonstrates how widespread facial recognition has become; fueled by its low barriers to entry, a front-facing camera and appropriate software.
“We identified the implementation of FaceID by Apple as accelerating the growth of the wider facial recognition market, despite the challenges to facial recognition during the pandemic with face mask use,” the research highlighted.
Seeing that technological innovation tend to trickle down toward other uses, all indications point toward the inevitable growth toward facial recognition for payments.
However, researchers at Juniper recommend that facial recognition vendors implement robust and rapidly evolving AI‑based verification checks to ensure the validity of user identity, or risk losing user trust in the authentication method as spoofing attempts increase.
Fingerprint sensors dominant, facial recognition growing
The new research – called ‘Mobile Payment Authentication: Biometrics, Regulation & Market Forecasts 2021-2025’ – found that fingerprint sensors will feature on 93 percent of biometrically equipped smartphones in 2025.
This compares favorably to hardware-based facial recognition, with just 17 percent of biometrically equipped smartphones featuring these capabilities in 2025.
“Hardware-based facial recognition is growing, but the ability to carry out facial recognition via software is limiting its adoption rate. As the need for a secure mobile authentication environment grows, smartphone vendors will need to increasingly turn to more robust hardware-based systems to keep pace with fraudsters’ evolving tactics,” research co-author Susan Morrow explained.
Voice recognition for payments growing, but limited in scope
In parallel, the report also found that the use of voice recognition for payments is increasing, from 111 million users in 2020, to over 704 million in 2025. The research identified that, at present, voice recognition is mostly used in banking, and will struggle to grow beyond this, due to concerns around robustness.
“Juniper Research recommends that vendors adopt a multi-method biometric strategy, which encompasses facial recognition, fingerprints, voice and behavioral indicators to ensure a secure payment environment,” the report authors noted.
Celsius wins best cryptocurrency wallet for 2021
London-based FinTech company Celsius has been awarded the Best Cryptocurrency Wallet award in the fifth annual FinTech Breakthrough Awards program which recognizes the top companies, technologies, and products in the global FinTech market today.
Celsius generates yield on crypto through its robust crypto-lending business and diversified deployment channels. Celsius manages over $10 billion in cryptocurrencies and is available in over one hundred countries around the world.
Celsius takes advantage of blockchain technology and provides a platform of curated services that have been abandoned by big banks such as high yield, zero fees, and lightning quick transactions as well as weekly rewards.
Users can also earn up to 15 percent APY in rewards on their crypto assets and access loans starting at just 1 percent interest rates. There is no minimum balance and with the Celsius app, sending crypto is as easy as sending a text. Celsius always acts in the best interest of its community, and rewards paid to users form up to 80 percent of Celsius’ revenues.
“Our approach has translated into more than just a crypto earning service. We are now a community of over 500,000 believers. Believers in blockchain, believers in high reward earning assets, and believers in achieving financial freedom,” said Celsius CEO Alex Mashinsky.
The FinTech Breakthrough Awards is the premier awards program founded to recognize the FinTech innovators, leaders, and visionaries from around the world in a range of categories, including Digital Banking, Personal Finance, Lending, Payments, Investments, RegTech, InsurTech and many more.
“Celsius has a worthy mission in providing people with better opportunities to gain financial freedom,” said James Johnson, Managing Director, FinTech Breakthrough an independent market intelligence organization.
“We are thrilled to recognize Celsius for their success and momentum in this mission, serving as a true example of breakthrough technology in the FinTech space. We extend our sincere congratulations to the entire Celsius team for winning Best Cryptocurrency Wallet for 2021,” Johnson added.
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