What does the future of payments hold?
Now more than ever, the payments ecosystem plays host to a wide range of players and the diversity of financial transactions is continually growing. From prepaid cards to peer-to-peer money transfers and now the rise of digital currencies such as Bitcoin, the market is crowded. Even within individual payment methods, such as mobile payments, the sheer plethora of technologies available has been flagged as causing too much confusion for consumers, and acting as a barrier to wide-scale adoption. Given all of this, is it realistic to expect one payment type to one day be able to fit all scenarios?
Currently, the list of payment options is endless and any number can apply to various scenarios. Whilst opting for a contactless card might be the obvious choice when using public transport or paying for goods in a local cafe, paying for a meal or booking tickets online requires consumers to consider several other payment options. The range of devices now available for us to make payments through only adds to this complexity.
The key will be discovering where the balance is between having a wide range of payment options for different scenarios whilst minimising consumer confusion and fragmentation. For some time now, mobile payments has been hailed as the next big hype. Having gradually gained popularity amongst consumers and now with Apple Pay at the fore, there is more noise in the space than ever, yet the technology has still failed to gain total widespread adoption.
We mustn’t forget too that there is an ongoing debate around the roles that cash and cards have to play. Despite being part of a much earlier generation of payments, cash and credit cards are far from broken. In some cases cash is still king and card payments are on the whole quick and convenient for the end user. Although fraud has risen in the US in recent years, there is general agreement that EMV adoption has significantly reduced fraud elsewhere, at least in physical stores. For credit cards in particular, one of the key advantages is their universal applicability. You can use your credit card for payment almost anywhere in the world, whether online, at POS, or for withdrawing cash from an ATM. While mobile payments are perceived to be more convenient, cheaper and secure than the existing ways to pay, do the same benefits apply everywhere?
Rather than debating if and how mobile payments might replace plastic cards, we should be looking to discuss which payment methods best fit different transaction environments.
Ultimately, no matter which method comes to dominate the payments world in future one thing is clear – all these transaction types will need to be underpinned by solid security. Any new techniques create new security vulnerabilities and potential attack vectors, and theft or misuse of payment data can rapidly dissolve all trust in emerging payments. Strong encryption underpinned by hardware security modules (HSMs) has been shown to be the best means of securing payments. HSMs provide a critical role in establishing trust across the payments industry and are essential for ensuring the highest standards of data protection, complying with regulation and managing cryptographic keys.
In recent years we as consumers have become attached to the idea that we need one universal mobile payment method to rule them all – we hear time and time again that mobile payments will not reach mainstream consumer adoption until one system emerges supreme. However, the truth is that perhaps we will simply have to accept that in future, we will pay online in one way, online (via mobile), in another, and pay tradesmen in another, rather than striving to develop one payment mechanism for everything.
This was a guest post from Ian Hermon, mobile payments specialist, at Thales e-Security
[Image:Katy Silberger - Flickr]