September 1, 2016
Shortly after e-wallet solutions reached mainstream adoption in the early 2000s and smartphones became increasingly ubiquitous, interest in mobile payments soared to new heights. But as new players flooded the alternative payments industry, the influx of payment options became too much to bear for consumers and merchants alike. Unable to differentiate one payment solution from another, consumers and merchants simply refrained from adopting alternative payments of any kind.
In recent years, however, concerns commonly associated with alternative payments have started to dissipate. 2015 marked the first time digital wallets were used more widely than traditional card payments. According to the 2015 Global Payments Report from e-commerce acquirer and processor Worldpay, the U.S. is expected to experience the largest shift toward alternative payments of any country. In fact, U.S. e-commerce turnover will grow from $312 billion to $536 billion by 2019—a 14 percent increase. Merchant-owned apps, tech players, bank-owned apps and general mobile wallets are leading the payments app race.
Needless to say, consumer knowledge of and confidence in alternative payments has never been higher. Still though, there is room for growth. In an effort to bolster the momentum behind alternative payments, key players in the ecosystem have set their sights on exploring the payments frontier. From biometrics and virtual reality to mobile devices and wearable technology, advancements across these mediums are impacting the consumer experience.
While biometric technologies have garnered a great deal of attention, perceived high costs and the hassle of registering details in public have all but eliminated their role in face-to-face environments. That, however, may soon change thanks to innovations like the PIN Entry Device Camera (PED Cam).
Embedded in a payment terminal, PED Cams snap a picture of card users as they enter their PIN number. The image is then used to generate a unique, biometric template that is connected to the individual’s card and the image is securely stored in a central database. Since the payment terminal is linked to the central database, new pictures taken during the most recent transaction can be cross-referenced with the biometric template. The end result is a multi-layered profile that can be used to prevent credit card fraud.
In addition to physical payment terminals, biometric technology has also made its way to the e-commerce industry. Once thought to be nothing more than an idea, genetic signatures via fingerprint scans and facial recognition technology may soon be used to authenticate online purchases.
The MasterCard Identity Check app, for example, enables users to either scan fingerprints or take selfies to confirm their identity. Once the user’s identity is validated, he or she can return to the merchant’s Website to move forward in the virtual checkout process.
Take a minute to imagine shopping at a store from the comfort of your own home. Developers are using virtual reality to invent new ways for customers to interact with content—including movies and music—in 360 degrees before making a purchasing decision and paying online.
One team of developers challenged by payments processor Vantiv to transform the consumer shopping experience through VR, created a virtual mall where shoppers can enter and exit stores, pick up products and make purchases with a simple head nod. In the same way that mobile wallets and mobile devices jumpstarted e-commerce spending, virtual reality may be the next piece of technology to shake up consumer shopping habits.
Mobile and Wearable Devices
From the Apple Watch to the Kerv Payment Ring, intuitive motions and biometrics enable consumers to authorize transactions in a matter of seconds. Similar capabilities are now making their way to smartphones. Scientists at Newcastle University have developed a system that requires users to draw an image as their password instead of entering a series of numbers, letters and symbols.
Named Background Draw-A-Secret (BDAS), the system first records how you draw the doodle you’ve selected as your password, paying special attention to the number of strokes, where you started the image and the order in which you made each stroke. Each time you draw the image to access a service or authorize a purchase, the system will monitor those three factors to ensure it mirrors the first drawing. For consumers who struggle to remember login details and passwords for dozens of different merchants or services, this solution can lead to a stronger payments experience.
Aside from motions or drawings, yet another way consumers can use mobile and wearable devices to complete transactions is by leveraging the power of near field communication (NFC) technology. Today, most point-of-sale terminals are equipped with NFC technology. Rather than digging through a wallet or purse for a credit card, consumers can hold their mobile device near an NFC reader for a moment to authorize a transaction. And since a physical card is never on display, risk of fraud is reduced.
Steady improvement in alternative payments technology has changed the way consumers shop in-store and online. From authenticating transactions with your fingerprint to completing purchases with a simple tap of your mobile device, the emergence of new payment methods makes one thing abundantly clear—the payments frontier is expanding. While continued technological advancements across all mediums are sure to enhance shopping experiences, payment methods involving biometric technology, virtual reality and mobile devices are especially important to keep track of moving forward.
Alison Ward is account director for Walker Sands Communications. Walker Sands is a technology-focused PR company serving multiple clients connected to the CNP payments industry.