You always have to pay for everything in this life. Both in literal and figurative meanings. But let's not immerse in the moral side of this issue and draw our attention to the financial dimension. Every day we go shopping and exchange our money with the product we buy. We can perform such transactions either by cash or by credit card. Usually, you insert your card in PoS-terminal and money is withdrawn automatically. But today you can already pay even without your card.
Contactless Payment Technology: Key Players, Benefits and Risks
Contactless payment system hit the market not so long ago but it is quickly gaining a wide popularity. In other words, it turned to be more convenient than we gave it credit. It saves your time and increases financial web security. Beyond any doubt, this high technology will have a great future. In this article, we will reveal a more detailed view to explain the phenomenon of a contactless payment. We will also pay much attention to the main players in this market.
A little about contactless payment
Contactless payment was initially integrated into the banking system. Bank cards got integrated circuits, chip, and antenna to send certain information about payment transactions to the terminal via the radio channel. Such technology changed the idea of financial transactions.
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Various payment systems call this technology differently: MasterCard Worldwide calls it PayPass while VISA calls it payWave.
Contactless payment tech
An important advantage of this card lies in it's comfort and safety. When you pay in any outlet, you don't keep it out of your hands, so risks of fraud come to naught. Besides, such cards simplify the payment process and allow serving customers much faster in restaurants and shops.
At the moment this technology is not so widely spread in some countries since many enterprises keep on using old PoS-terminals without contactless features. But every year the situation is changing for the better.
Apart from banking cards, you can also use a mobile device as a payment tool. Due to NFC technology, smartphone or tablet become a virtual contactless card. This contactless payment technology is being integrated into many devices of famous hardware and software manufacturers like Google and Apple - the key players in this market. I offer you to consider this issue in more detail.
Key players in the market of contactless payment
Last years there are many interesting new things in IT area that open world of mobile payments and purchases for growing number of users when they don't need to pull their wallet out. The convenience of such purchase process leads to people's intention to have the device that will make it possible to pay for purchases quickly. And nobody wants to think about whether they forget their credit card and PIN code or not. So utilization of mobile phones, as well as other gadgets, to make quick and safe purchases became a solution.
In September 2014, Apple presented it's new payment system Apple Pay. And it is not just an app, it is a payment platform integrated into the operating system of Apple devices. But it is not only iPhone devices but also smart watch Apple Watch.
Using iTunes, users can get a digitized version of banking card and subsequently make payments with this card (or a few cards) using a wireless NFC connection. This is a high-frequency technology of communication that allows exchanging data between devices located about 15 cm from each other.
Apple Pay interface
NFC technology is used in Google devices running on Android OS as well. You can use it for payment in Android Pay system. This contactless system was launched in September 2015 and today it is the largest competitor to Apple Pay system. Why? Because Android Pay doesn't concede to Apple payment system by convenience or security, but also it has an advantage in compatibility.
Android Pay interface
Need more players?
Well, Apple and Google are not the ones that hit the market of contactless payment systems. Samsung company also started developing it's own payment systems.
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Furthermore, Samsung stays apart from it's competitors since it uses MST (Magnetic Secure Transmission) technology. MST works not only in devices with NFC support but also in all terminals that read cards with the magnetic stripe. However, cyber security professionals consider this technology as outdated and not secure. Thus, the idea of it's integration did not receive a wide support among users.
So how does it work?
In fact, the principle of payment systems operating on the basis of Google and Apple is identical: you want to buy specific goods and choose them. Then you bring smartphone or smartwatch to the payment terminal. Terminals that technically support such type of transactions are usually marked by specific labels. You see confirmation of the transaction. Then you use Touch ID or password for transaction confirmation. Then confirmation data is sent to the payment terminal. Voila!
Compatibility of systems
Android Pay is a payment platform built in operating system of Android devices. It operates in all phones with Android KitKat 4.4 and further that support NFC technology. It is worth noting that in the USA (that is the main battlefield between two giant brands) there are about 50 millions of devices that meet the requirements above.
For comparison, Apple Pay holds only the third place in the country and is used by 11% of the American population. First place is occupied by Android Pay - 19% of US consumers gave their preference to such system.
Moreover, Google has no intention to lose ground. Hence, it is going to work on the full-fledged compatibility of Android Pay with a larger number of smartphones including OS versions older than Android KitKat 4.4. At the same time, the vulnerability of Apple is in it's relatively limited range of products. Even despite the fact that apart from iPhone smartphones, Apple Watch is also equipped with it's payment system.
Security of Android Pay and Apple Pay
Apple Pay is operating with Touch ID that is a unique identificator which is using your fingerprint or password. Cards numbers and transactions are stored on iOS devices or Apple's servers. Transmission of banking card number is not implemented.
You can always block an access to your personal data using Lost Mode that will delete everything from your mobile device - both information about transactions and banking cards. It is can be necessary when somebody steals your gadget or it is lost.
Apple Pay Touch ID
As for Android Pay, it's advantage and disadvantage simultaneously lie in the lack of ability to operate in root access rights. Google guarantees the protection of their payment system only using specific API kit available in phones without root rights.
Platform for the protection of customer's data in Android Pay also uses tokenization and Android Device Manager that allows to destruct all data in the device in case of it's lost. Also, new OS versions starting from Android 6.0 Marshmallow make it possible for you to confirm payments with your fingerprint.
Android Pay screen lock
Contactless systems have a great potential. It is much more convenient to use it instead of your conventional wallet. Undoubtedly, Apple and Google will improve their systems to satisfy their clients.
Benefits and risks of mobile contactless payments
But before you decide to create your own payment system or integrate the payment gateway into your new app, it would be better to consider all benefits and risks of the contactless mobile payment system.
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Thus, you will be able to take into account all pitfalls you may come across. First, let's speak about it's advantages.
For sure, it is a first thing that comes to mind. People don't need anymore to pull out their credit cards or cash. Everything you need is your mobile device. So users can make payments much easier and faster than it used to be. And it also can make you closer to your customers since it increases interaction with them.
You don't need to buy expensive equipment or give the change to customers. Furthermore, you can also forget about paper receipts and ink to print everything out. Users will get all payment receipts in digitized version. So there is a great benefit to nature as well.
When you make a mobile funds transfer, in most cases funds are transferred much faster than when you make usual banking transfer or transfer via self-service terminal. But it can depend on a various situation including a day of the week and particularities of transfer.
You can add to your payment system loyalty programs. For example, the client will get the bonus for every transaction or some kind of reward like coupons. In turn, any payment system can draw more clients to use it.
if we speak about contactless cards, then, of course, it is impossible to mention the increase of their lifetime. When you use common plastic cards, you always insert it in terminals, ATMs, and it is wearing out very quickly. A magnetic stripe is rubbing away, so then card simply stops functioning. Contactless cards have no mechanical contact so it will play it's role until the date of expiration.
But not everything is so shiny, and don't forget that there is always a fly in the ointment. Contactless payment also has some drawbacks and we will check it out right now.
Despite the fact that contactless technology is considered to be one of the most secure, world of fraudsters is trying not to be behindhand. Unfortunately, fraud schemes are developing quickly and malefactors are always looking for ways to steal your money. Today violators create gadgets that may read your card's data and steal money. Even in a crowd, a person can do it. So you should always be on the alert.
As it was mentioned above, mobile payments can be much less expensive than the cost of PoS terminals. But even in this case, you need terminals with NFC support and high-tech smartphone. So you will not be able to make contactless payments without these devices. In addition, good Internet connection availability is also required.
Not everybody is using Android phones only. The same concerns iOS devices as well. So although mobile payments can be similar to each other by it's qualities, there is a hardware difference. Apple Pay is using Secure Element for the protection of security data, while Android Pay uses Host Card Emulation. And terminal must be developed considering both of these solutions. Otherwise half of payments may be impossible to be done.
The human factor is also should be taken into consideration. When a new technology hits the world, no matter how smart and convenient it is, people need a lot of time to adopt it. And before they start using contactless technology, it will take time since they will keep on paying with their usual plastic cards.
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So that is what situation with contactless payments we have. It is developing and the number of users is growing every year. It is undoubted. But one never forget about risks and pitfalls that you may find on your way using contactless technology.
If you don't want to use existing contactless payment system or you need a proprietary app for making a contactless payment, you can always find a good software development company. Do you have any questions? Read our articles, sign to our blog, and contact us anytime!
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