Amid the covid 19 pandemic, contactless payment solutions have come into play. Although they were still in use before the pandemic, they have become more important as people get more germ-conscious and adapt to the new norm of social distancing. Contactless payment solutions are very valuable to businesses to help them continue operating while ensuring safety by combating the spread of the coronavirus.
According to a recent survey, 30% of consumers started using contactless payments since the onset of the pandemic, and 70% of that population is more likely to continue with the trend post the pandemic. Generally, there has been a steep increase in the use of contactless payments globally.
The technology behind contactless payments
Although the pandemic has led to the adoption of contactless payment solutions across the globe, the technology behind it is the reason many business owners find it a suitable method of payment processing for their business. There are two types of contactless payments currently.
Whenever a customer uses a contactless card to make a payment, the card establishes communication with the point of sale terminal through RFID (radio frequency identification) or NFC (near field communication). Following that, the card generates a unique code for every transaction, which accelerates the process. Contactless card transactions do not need a pin or signature; therefore, they come with a limit per transaction known as cardholder verification limit (CVM) to ensure the safety of the user’s account.
Electronic wallets or mobile wallet solutions simplify the process of making payments safely and conveniently. These include Apple Pay, Google Pay, Mastercard, Venmo, and Masterpass. The technology behind this is tokenization which makes e-wallets the most secure form of payment. What happens is, a token or value replaces all the sensitive information such as the card number and other data that is prone to scams and fraud. In combination with radiofrequency, tokenization makes e-wallets secure, quick, and easy in processing payments. The device also never stores the actual account number in it.
Contactless payment solutions as a part of next-gen payment solutions
Thanks to technology, we no longer have to bring cash or credit cards to buy whatever we want in this digital age. The only thing you need is your contactless card or nothing if you have your smartphone. Contactless payment solutions are a critical part of the next generation of financial services. Banks and fintech companies need to expand their technological capabilities to satisfy the ever-growing demand of consumers. Some of the ways they can use include:
Developing a collaborative approach between traditional banks and fintech
Fintech companies are leading the way to facilitate payments, which has led to increased collaborations between them and banks. This collaboration results in a win-win situation as fintech companies can benefit from existing banks’ infrastructure while banks learn more from innovative fintech technologies.
More digital innovation with open banking
Open banking and the European PSD2 (payment service directive) are driving digital payment services in recent years. Open banking helps users manage their finances and access multiple payment methods. It also involves decentralized practices which enhance customer’s security.
More personalization and customer experience
Customer experience and personalization are the key determiners of whether consumers will adopt contactless and digital wallet services. As such, the implementation of a good customer experience is critical.
The bottom line
We can expect more contactless payment solutions in the future, which might see fintech companies saturate the financial sector.