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This is a guest post from David Smith, a cryptographer with 12 years of experience in both the public and private sectors. He is currently working on his second startup (currently in stealth mode) that will track and interpret the use of contactless payments in the Greater China region. His expertise includes: system design and implementation with contact and contactless smart cards, smart card personalization, mobile payments, and general knowledge and experience with APAC market trends and consumer preferences.
In the last four years, the rise of contactless and mobile payments have gone meteoric. The cause is not far-fetched. Simplicity, speed, convenience, relative security, and a few others are some of the primary reasons why these payment systems have thrived on and will continue to at the expense of traditional methods until the said traditional methods fizzle out into extinction.
Both contactless and mobile payments systems are facilitated by digital technology, and the list of fringe benefits that technology offers continues to expand.
Contactless and mobile payment methods share something in common. They are done wirelessly and without any human contact whatsoever with physical cash. Essentially, they are both contactless forms of payments.
For clarity sake, we shall look into both of them singly and create a marked distinction between them. In doing this, you’ll be able to understand the difference between both payment methods. However, do make a mental note of this: they are both payments methods brought about by the technological revolution of the 21st century which offers more flexibility, convenience, speed and security in making payments in contrast to conventional payment systems where physical sums of legal tender are involved, and security is a major challenge.
With that in mind, let’s get started with the contactless payment technology.
In contactless payment technology, just as the name suggests, all payments are made through a medium that does not demand fulfillment using physical cash. Everything is done electronically through a wireless technology known as the Near Field Communication (NFC) technology.
Since physical cash is entirely out of the picture, contactless cards, key fobs, and other handy items are used to initiate and facilitate these contactless payments. But the use of cards is more common in contactless payments. These cards are more than just cards, they are mini computers with the capacity to store information and read them.
They come with an encoded memory chip which is used to store private financial data exclusive to users and a wireless antenna that facilitates the wireless or contactless connection between the cards and their card readers or NFC readers as the case may be. The encoded chip in a contactless card makes it a smart card and as well, a pocket-sized computer.
You would recall that with the traditional method of using cards to make payments, you’ll have to slot the card into a card reader and punch in your password before any transaction can be accepted. That method is being ditched with the surge of technology in the form of contactless payments. In this case, you don’t insert the card into any card reader or Point of Sale (POS) machine to enable a connection between the card and the reader to be established.
All you do in this case is to bring it near the reader, and with the aid of a Near Field Communication (NFC) Technology, a connection is established between the contactless card and the reader. Subsequently, a transaction is initiated and carried out.
The connection is initiated by the card reader which is NFC enabled (and also known as an NFC reader), while the card responds to the connection by tapping into the short electromagnetic wave of the radio frequency region that is being generated by the reader through the help of a wireless antenna embedded in it.
Transactions like this are twice as fast than the conventional means of payments where cash is used and have to be counted for accuracy.
So, there you have it: contactless payment and how it works. Now, to the next.
The mobile payment system works in two ways; through mobile banking apps and mobile wallets. As mentioned earlier, the mobile payment technology works the same way as that of the contactless, but the media being deployed here is a smart device such as a smartphone or watch and not computerized cards. Although cards can still be used, but not real cards, they are called E-cards or E-wallets. So let’s start with the first which is the Mobile Banking apps.
This system is more generic in the banking industry. Every bank now has its own mobile app that is available to customers. Customers can download them and use them for making mobile money transfers to third parties across the globe.
This system is efficient, saves time and can be done at the user’s comfort zone. The mobile app is installed in a smart device; a smartphone or smartwatch and can be used to pay bills and purchase items at Point of Sales (POS) depending on customer preferences.
Predominantly, this mobile system of payment is used for paying bills and making money transfers. A broadband wireless internet connection or Wi-Fi connection is used to mediate this form of payment as opposed to using short-range radio waves as in the NFC technology deployed in contactless payments.
Apple Pay, Android Pay, and Samsung Pay are leading as merchants in the use of E-wallets. In this form of payment, the details of a customer’s credit card are installed in an app or for tech sake, an E-wallet.
This comes as a substitute for contactless cards. Here, you have all the details of your credit or debit card as mentioned above in the contactless system of payment, entered into your mobile device, so you can wave the cards goodbye because everything is now mobile. Now, this system of payment is similar to that of the contactless payment system in that it uses the NFC technology and so it needs you to unlock your smartphone first, unlock the app and use your thumbprint or password to open the e-wallet. For a connection to be initiated, the smart device needs to be placed near the reader device. This too is a safer, convenient, and speedy means of making payments.
These contactless and mobile systems of payment have come to stay, and there is no going back in the quest for making life more comfortable with technology for people of the 21st century and beyond. They’ll continue to evolve and include a lot of useful instruments that’ll enhance payment methods across the globe.
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