In the past few years the payment landscape has undergone rapid developments with increased ado...
Even before the pandemic had taken its strong grip around the world, contactless payments were already being used widely. However, ever since the world was back to business, they had to do business as well as take care of their health by following social distancing norms etc.
Contactless innovations such as contactless payments ensure this and have come handy in these times. In this article we will look at how these innovations are helping in these unprecedented times.
The world has witnessed a significant rise in the number of people adopting contactless payments. Many people have resorted to the use of mobile wallets and tap to go credit cards. Mobile wallets in India like PayTm, PhonePe, Google Pay etc. have seen increased usage. It is expected that more people are going to use this form of payment than they were before the pandemic.
Debit cards and credit cards are also witnessing surge in usage. As people are avoiding the usage of cash as far as possible and replace it with the use of contactless payments considering their health safety.
It is now seen as an effective way to help businesses overcome the bad effects of the Covid-19 pandemic. In fact the World Health Organization also has the same view. According to them, “As far as possible it is advised to use contactless payments to avoid the risk of transmission”.
We need to understand the technology behind the contactless innovations when it comes to making payments. There are two types of payments that are used. One is using contactless cards and other using the e-wallets. These have discussed in detail below.
Whenever a user uses a contactless card to make transaction, the card establishes communication with a POS terminal through NFC called as Near Field Communication or Radio Frequency Identification. Once the communication is established, the card generates a unique code for every transaction that makes the transaction safe and secure.
As there isn’t any need for a signature etc. such payments come with a limit per transaction which is called Cardholder Verification Limit. It is an effective way to protect user account.
As this form of payment gains momentum across the world, financial institutions are also increasing their limit of CVM to allow customers to make their transactions with safety.
As stated earlier, E-wallets are another form of solutions that enable users to make easy payments. It is also considered as the safest method. With tokenization, mobile wallets are secure methods of making payments. In this, all sensitive data is replaced with a token. It protects the sensitive private data such as card number that are used by fraudsters to con people.
What it also means is that the device doesn’t store the actual account number on it. Tokenization along with Radio Frequency Identification provides a quick, easy as well as secure way of making transactions.
There are multiple benefits of using contactless method for payment. Some of the benefits include:
One of the obvious benefits is that there is no contact between you and other person as the whole process is contactless. Therefore, you are protected from the scare of corona virus.
As per estimation, it would take a matter of few seconds to make such transactions. Therefore speed, is one of the prime benefits of this mode of payment.
This technology is more reliable and secure than other method of payment. It protects against any fraudulent practices.
With a smoother and quicker checkout experience, most of the users have accepted this mode of payment.
With contactless payment method, one can pay from anywhere and anytime. The payment option is available 24*7 to users. Therefore it’s the most desired option.
Fintech and banks must expand and evolve their technological capabilities in order to meet the demands of customers.
This can be done by:
Fintech has evolved and developed in terms of payments. They have never backed away from providing highly valuable and user friendly service to users. This has caused many Fintech and banks to collaborate at a very high rate.
It is advantageous for both banks as well as fintech. By collaborating Fintech can access large scale of banks and infrastructure whereas it will allow banks to learn new skills and also create innovative Fintech solutions.
The collaboration is not only limited to payments as there are instances of providing mentorship to start-ups who are in early stages.
Open banking has been key drivers of digital services in the last few years. It has third party providers and banks that harness the customer financial information allowed by customers. It enables to make their relationship stronger with users.
Open banking also has decentralized practices that allow users to share their data with banks. It ensures that the users can manage their finances in comparatively better way.
Customer experience should be the priority as far as improving digital services is concerned. It is a key factor as it would determine whether there will be a widespread adoption of contactless services by the customers.
Read our article:Digital Payments Transactions Increase during Covid-19