Over the last few years, financial technology has
revolutionised how people pay for goods and services. Contactless payment
technology is one of these advancements, which is becoming increasingly
popular, with mobile payments such as Apple Pay and Google Pay joining in
alongside contactless credit and debit cards.
The convenience of contactless payment technology has made
it an easy way to make purchases without dealing with the hassle of pulling out
cash. This article explores the potential of contactless payment technology and
where it may be heading in the future.
The rise of contactless payments and a cashless society
Contactless payment technology is a unique advancement that
has completely changed how people transact for goods and services on the go.
With the popularity of mobile payments, contactless credit cards and other
payment systems taking off in recent years, it is clear that this trend will
not be slowing down anytime soon.
According to a recent report by investment management firm Bailard,
"In recent years, we have seen rapid global adoption of a superior form of
digital payments: contactless payments (also known as “contactless”, “tap to
pay”, “NFC payments”). Currently, consumers interact with contactless payments
through two primary forms – contactless-enabled credit and debit cards, and
mobile wallets (such as Apple Pay, Google Pay, and Samsung Pay)."
The steady reduction in the number of cash points and the
shift towards online banking and modernised payment processes, according to
Michael Schrezenmaier, CEO Europe at SumUp, has accelerated the move toward a
cashless society in recent years. He said, "There's no doubt that some of
the biggest innovations in regards to merchant products and services being
utilised in the industry have been around contactless payment solutions. What's
more, the onset of COVID-19 and the need for merchants to respect social
distancing measures and health guidelines put in place by the government has
meant that this reliance on contactless payment solutions has become even more
important over the past 18 months."
A cashless society has many benefits for both individuals
and businesses. From an individual perspective, it is much easier to make
purchases without physically carrying cash around when they are out shopping or
dining at a restaurant. Furthermore, making payments in this way prevents the
risk of losing money if their wallet is stolen while on the go. It also goes a
long way in terms of tracking payments so law enforcement agencies can easily identify
individuals who are involved in illegal activity.
The significant increase in contactless payment technology
also benefits businesses. For example, with the rise of mobile payments systems
such as Apple Pay and Google Pay, retailers are finding it much easier to
accept card transactions on the go without the need for an expensive payment
terminal or contactless terminal machine. As well as this, the time it takes to
make payments is much faster than paying with cash or cheques and there's no
need for change when making small purchases.
The difference between contactless cards and smartphones
There are three main differences when it comes to NFC on a
powered device such as a smartphone over contactless cards, according to
Dickson Chu, CEO at Copper and a former Managing Director at Citibank;
1) Peer-to-peer, so two NFC-enabled devices can establish a
connection and share data;
2) Read/write, so an active device such as a phone can pick
up data from a passive device without the capability of reading information
itself, such as a contactless piece of plastic;
3) Card emulation, so people could create digital copies and
reproductions of physical cards.
This difference means smartphones hold a lot of potentials
when it comes to playing in this space. With the rise of smartphones and mobile
devices, there is a lot more opportunity for unexpected use-cases of
contactless payment technology.
In terms of security, with card emulation on Android
devices, users get all the benefits that come from physical cards (such as
tokenisation) without the drawbacks. For example, unlike contactless cards
where people are limited to certain types of payments or have restrictions on
how much they can spend per transaction, there is no such limitation with
The future of contactless payments
According to Greg Goldfarb, VP of Commerce Products at
GoDaddy, "Although many social distancing restrictions have eased, in the
last two years, consumers developed new habits that have become expectations
for how they shop —one, in particular, is a shift to contactless payments like
Apple Pay and Google Pay. Consumers are becoming a lot more comfortable relying
on a digital wallet and reducing the usage of their physical credit
While there have been many advancements in contactless
payment technology in recent years, this is just the beginning of what seems to
be a considerable shift towards cashlessness. As society becomes more reliant
on mobile devices and contactless payment solutions are integrated into
everyday life, it will not be long until we enter an era where physical money
"The push from regulators to go cashless will speed
ahead, and we're certain to see the continued closure of branch banks in small
towns across Europe, eliminating easy access to cash, and further reinforcing
the reliance on contactless payment solutions. Concurrently, as consumer
behaviours keep demanding better and more innovative products, as well as the
continued growth of ecommerce, we're likely to see a wider variety of mobile
payment solutions, such as further NFC-enabled payment trends (such as wearable
payment devices like watches and rings), in addition to innovations in QR code
payments," adds Schrezenmaier.
In summary, the future of contactless payment technology is
bright, and it seems these innovations will only continue to grow into the
foreseeable future. With many people already preferring digital forms of
payments to card transactions, the fact that there are now more contactless
payment terminals than ever before is just another step in this process. As
well as this, with new developments such as Apple Pay moving to a cashier-less
store concept which does not require any NFC hardware at all but instead uses
Bluetooth technology and facial recognition software means people could be
living in a cashless society in a matter of years.
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