The pandemic has ensured that future of FinTech is contactless
Payments cards, mobile payments, QR Code, RFID, & biometrics, all growing from the need for social distancing
The pandemic has pushed the world of FinTech towards contactless payments, as social distancing has become imperative during transactions.
Contactless payments have been in use for years, but it’s the pandemic that has caused a supersonic growth spurt in the sector. The spending limit on UK payment card consumers has now reached £100, doubling since the pandemic started, when it was £45.
In India, demonetisation was already pushing cashless transactions. The pandemic added to the existing need to go contactless, so that India is at the forefront of this technology adaption.
This month, the National Payments Corporation of India (NPCI) partnered with a private bank to start a first-of-its-kind RuPay On-the-Go contactless payments solutions. This wearable payment solution will eliminate the need to carry a physical card, allowing immediate payments with a simple ‘tap, pay, go’ mechanism.
The Tech Panda spoke to PT Suresh, Founder and Director of Paycraft Solutions, a FinTech company founded in 2013 with an aim to enable and ease urban mobility, is a homegrown MSME and one of the pioneers in implementing contactless payments.
Suresh talked about the significance of being contactless in FinTech today and the technologies that are making this happen.
The pandemic has been the key driver for contactless technology in payments, with speed of transactions increasing in special use cases like transit, toll, parking, etc. That is the reason globally contactless payment instruments like tap and go cards, smart mobiles etc. have been in use in these sectors
“Nowhere is contactless technology as relevant in the FinTech sector as payments. The pandemic has been the key driver for contactless technology in payments, with speed of transactions increasing in special use cases like transit, toll, parking, etc. That is the reason globally contactless payment instruments like tap and go cards, smart mobiles etc. have been in use in these sectors,” he says.
PayCraft works closely with global Card Networks like Mastercard, RuPay, Visa and Mercury (UAE) and has built specifications on contact and contactless cards of these card networks like RuPay qSPARC (NPCI), M/Chip Advance (Mastercard) and Mercury (UAE).
The startup has created synergies in the offline issuance and acquiring space solutions with some of the major public and private sector banks including SBI, Axis Bank, ICICI, HDFC etc. to issue open loop retail and transit compliant cards and has also marked its presence internationally with its Prepaid Card Issuance solutions being deployed in the UAE and other countries.
Contactless Payments Cards
Payments using a card can be traced back to the 1990s, when Mobil, an American oil company that later merged with Exxon to form a parent company ExxonMobil, offered their ‘Speedpass’ contactless payment system for participating Mobil gas stations.
Today, credit cards, debit cards, key fobs, and smart cards, are used in abundance, and they are all going contactless. These are already in use for gated ticketing with access control like metro rail travel in public transport and in toll payment.
“These cards operate on Near Field Communication (NFC) technology, where the interaction of a contactless card with a reader takes place within a 10 cm radius,” says Suresh.
But are they safe?
The Future is Mobile
Going ahead, card payments may become obsolete as mobile payments are on the rise. With the highly infectious COVID virus, contactless transactions are now essential from a health and safety point of view.
A recent Juniper Research report has predicted that transaction volumes for mobile payments will grow from 26 billion in 2021 to 49 billion in 2023, a 92% spike. It also anticipates that 99% of all contactless payment transactions by volume will be tokenised by 2023.
Contactless technology like NFC, RFID etc. are now considered imperative not only for the special use cases indicated earlier but also for health and safety reasons
Growth in mobile contactless transaction volumes will substantially surpass contactless card volumes by 2023, as mobile contactless transactions grow twice as fast as contactless card transactions.
“Payment contact cards with the need to touch keys or touch screens are also not safe though better than cash transactions. Contactless technology like NFC, RFID etc. are now considered imperative not only for the special use cases indicated earlier but also for health and safety reasons,” explains Suresh.
Optical Image: QR Code
QR code stands for quick response code and is a 3D bar code, which is a machine-readable optical label that contains information about a ticket or an item to which it is attached. This is read by standard off the shelf optical camera readers and information processed in a jiffy for a transaction of payment, identification, etc.
“The reading happens in contactless mode and is today one of the most popular technologies. These digital images are downloaded on smart mobile phones after online purchase through ecommerce, using apps or websites of the sellers like public transport or parking authorities,” Suresh explains.
In India last year, after the RBI mandated a move towards interoperable QR codes, companies like PhonePe, Mobikwik, Razorpay, and Freecharge have adapted QR code-based payments to secure transactions coming in from small traders, including informal sections like kiranas. The RBI also launched Bharat QR and UPI QR.
Low Energy Blue Tooth
Most smart phones and tablets now come equipped with Low Energy Blue Tooth, which is used to communicate between two devices and is used for exchange of information for payment uses cases, money transfer etc.
As the words ‘low energy’ suggest, this technology allows transactions to occur even with weak Internet connections.
Low Energy Blue Tooth is a short-range wireless technology standard that is used for exchanging data between fixed and mobile devices over short distances using radio waves
“Low Energy Blue Tooth is a short-range wireless technology standard that is used for exchanging data between fixed and mobile devices over short distances using radio waves,” explains Suresh.
PaySe, an offline digital cash product, which proposes to help in digitisation of payments in rural areas, uses this protocol for secure wireless offline payment mode.
Radio frequency identification technology is used for contactless reading over relatively longer distances (up to ~17 meters), and the most popular use case in India is the reading of toll tags under the brand name FASTag.
FASTag is an electronic toll collection system in India, operated by the National Highway Authority of India, which utilises RFID technology to make toll payments directly from the prepaid or savings account linked to it or directly to the toll owner.
Biometrics for Trust
The Juniper report recognised that enhanced security and increasing cross-channel payment capabilities of mobile contactless payments are the major drivers of growth.
At the same time, consumer trust regarding digital wallets is still a hurdle. The industry needs to leverage technology in the form of biometric authentication in their services to allay the fears of those hesitant about adopting the technology.
Emerging technologies like facial recognition and voice recognition can help here.
The ability of mobile payments tokenisation to reduce the scope of payment security requirements means that the tokenisation of mobile payments will become ubiquitous.