The payment industry involves hundreds of companies worldwide supporting
billions of transactions each year and is worth about $5 trillion, according
to the Electronic Transaction Association. Securing this system and enabling
new transaction opportunities are considered some of today’s hottest
topics in technology.
What’s all the buzz about? This three-part blog series will shed
light on the myths, hottest trends and NXP forecasts for contactless payments.
So first, let’s clean up three of the most common myths about
Myth 1: Offline shopping will come to an end
People are still shopping in person, especially in retail outlets and
convenience stores. Despite the exponential growth in e-commerce traditional
brick-and-mortar stores are alive and well. The U.S. consumer market is a good
example. It covers everything from food and drinks to drug-store items and
cosmetics, household goods, clothing, and entertainment like books, music and
videos. According to the latest quarterly retail e-commerce report released by
the US Department of Commerce for third quarter 2015, e-commerce sales in the
third quarter of 2015 accounted for 7.4 percent of total sales, with still the
large majority of transactions happening in the store. Brick-and-mortar
shopping is driving growth for in-store payment, including EMV contact and
contactless cards or mobile payments with traditional countertop
(POS) systems and increasingly popular roaming mobile POS
(mPOS) devices in-store. And even as traditional storefronts continue to see
growth for in-store payment, secure e-commerce payment solutions increase
(check back for part two of this blog series to learn more).
Myth 2: Wallets are about to be worthless
First of all, there are clear data points to support the view that mobile
payment will continue to grow: NFC-enabled cellphone shipments are expected to
quadruple by 2018 (IHS Technology, 2014) and big market players such as Apple,
Samsung and Visa are pushing for the use of phones as wallets. According to
Wired magazine Apple CEO Tim Cook said that within the first 72 hours of its
launch, Apple Pay users added one million credit cards to the system.
Nevertheless, the impact may be misportrayed. We will likely never be
completely cashless, hardly ever cardless and rarely without a mobile device.
The realistic view, as further confirmed in research by Deloitte (2015), is
that different means of payment, including phones, credit cards and cash, will
co-exist for some time. Furthermore, Deloitte predicts NFC-enabled smartphones
as additional payment opportunity next to the existence of hundreds of
millions of contactless credit and debit cards. In effect, the payments
industry is continually looking to create less friction and the current mobile
payment methods are another instance of an existing plastic credit card.
Myth 3: Contactless payment is insecure
If there is any reason that consumer adoption of contactless payments is
slower it is due to perceived security concerns. Cash is tangible and requires
change in return. EMV contact cards require PINs or signatures, whereas
contactless payments (below 25 USD) only require a card or a mobile device to
be within 4 cm of a
reader for the initiated transaction to take place. From a security point of
view, consumer data is just as safe as with a chip card transaction
(and tremendously more secure than mag stripe transaction). A secure
element (the secure chip in a card or phone) is a specialized,
tamper-resistant microcontroller that can be used to transmit random,
one-time-use codes or your debit- or credit-card number in an encrypted
manner. Additionally, transaction value limits are set so that after so many
transaction or value of transactions, for example $100 dollars in Australia, a
consumer would need to enter a PIN to re-confirm the transaction. As people
become used to using NFC-based payments with secure elements, the level of
trust in the technology will increase.
Do you make more purchases online or in-store? Do you use a mobile device for
payment? And does security play a role in your decision to use or not use a
mobile device for payment? Let us know.