The speed of change in online payment transactions means change. The payment options are constantly changing. We show which technologies are important. With technical progress and consumer wishes, payment options are also constantly changing. The decisive factor is convenience: Even the most innovative and secure payment method will not be accepted if it is complicated to use. Nobody wants cumbersome data entry anymore, the same applies to impractical authentication processes and multiple entries of data. The year 2021 has some innovations in store in this regard. We present three trends that are currently arriving in payment transactions and three other topics that can be expected in 2021 and beyond. Also read our article on What are the Ways to Receive International Payments.
In the past, there were often signs in shops used to say: “Card payment only from 10 euros!” Today you can read more often: “Please pay by card – for the sake of hygiene”. The risk of transmission of coronaviruses through the exchange of banknotes is not relevant, but the fear of end consumers is greater.
And so many customers are currently experiencing what happens when they simply hold their card with the chip up to the reader at the checkout. Surprise: the transaction is initiated. More and more customers will enjoy this wow experience in 2021 and thus contribute to the spread of cashless, contactless payment.
Paying with a beep is not limited to checkouts. The transport company can use it to read normal credit cards from non-registered customers via NFC, so it is not limited to its own customer cards. The cheapest price is automatically determined for several things like travel trips, provided that the same card is always used.
Mobile payment with the smartphone is considered practical all around the globe. Consumers no longer have to carry cards around with them in addition to the phone. The smartphone with its built-in tools also takes on biometric authentication or receives a push. And finally, consumers have a good overview of the expenses made via their banking app or wallet – but this also applies to the provider of the phone and the associated services. And yet mobile payment is only slowly gaining popularity.
Purchase with security
Online buyers love buying on account, among other things for data protection and control reasons. Online retailers are often not that enthusiastic about this, and they take the risk when making a delivery. They worry about payment security and fear – especially the smaller ones – for their liquidity. Many transfer the risk management to a fulfilment provider or payment service provider (PSP) or rely on a “secure purchase on account”. Providers such as PayPal offer to purchase on account options where the merchant receives a payment guarantee. Around three-quarters of retailers now rely on secure purchase on account. The instalment purchase, which makes high-priced goods affordable for customers, moves in the same direction. Providers offer procedures in e-commerce and at the point of sale (PoS) that quickly and discreetly give the green light for instalment payments. They take on risk and receivables management.
One of the most popular virtual stolen goods is the credit card number. At the beginning of the millennium, replacement numbers (“tokens”) were introduced that could be safely stored by the merchant, while the primary account number (PAN) remained on the highly secure servers of the payment service provider.
The major card brands also use tokenization. It no longer only includes the card number, but also other features such as device information, the design of the card, the expiry date or the security number (CVC). In future, the replacement data for these features will be transmitted in encrypted form with a transaction-related cryptogram so that real data from online shopping will disappear. With the rollout in 2021 and the allocation of replacement numbers via so-called token service providers, the next stage in the fight for more security for online card payments will ignite.
Tokenization and the associated secure storage of credit card feature at the source is the basis for another innovation in card payment: Click-to-Pay. It is a wallet that is being promoted in a joint project by Mastercard, Visa, Discover and American Express and is already in use in the USA and Canada.
The credit card organizations recently had to experience how the successful wallets from PayPal, Google, Apple and Co. let their valuable brands take a back seat. It may also be a Visa or Mastercard, but customers are increasingly paying with PayPal or Apple Pay. There is also headwind from Europe because in the long term the EU Commission is primarily relying on real-time transfers via instant payments, which work entirely without a card and should run as smoothly as sending an email or a text message.
The credit card providers who already have most of the data and are making the necessary preparations with click-to-play are repositioning themselves here. The aim is that customers no longer have to enter numbers on the small smartphone screen and can use authentication options such as fingerprint and face recognition. It will also no longer be necessary to update an expiry date, everything happens in the background, in the interaction of the card-issuing bank and the card brand.
With strong authentication, two of the three security factors knowledge, possession or property must be fulfilled for a payment to be triggered successfully. The knowledge factor is increasingly taking a back seat.
If ownership is documented by registering a smartphone, a biometric property would be the perfect addition to quickly and easily check whether you are authorized to pay. And not just for paying: This year we will see more and more retailers who will give their customers the option of logging in with a fingerprint or a face scan when they log into their customer account. It’s quick and safe.
If merchants opt for the so-called delegated authentication, they can often use the registration to confirm their payment without the customer being asked again by his bank for authentication – good for the conversion. 2021 could mark the beginning of the phase-out of PIN and password. Once again, the convenience of payment transactions would have increased.