Credit card folded into paper airplane in atmosphere symbolizes contactless payment technology
#Payment Technology

Card tech evolution 2020+

Global Trends
6 Mins.

The coronavirus pandemic has accelerated the online payments revolution – and card technology is in the limelight, having played a key role during the crisis. As global economies emerge from the lockdown into the new normal, what’s in store for the evolution of card tech in 2020 and beyond?

It’s something of an understatement to say 2020 has been a challenge for many sectors. As part of the new normal, credit card technology has been thrust under the spotlight for its role in supporting social distancing and keeping the economy’s wheels turning. Now, as economies emerge from lockdown, the role of contactless payments in opening up countries and getting people moving is once again coming into focus.

Even before the coronavirus pandemic, we were already observing an ongoing revolution in consumer habits. According to UK Finance statistics on card transactions by UK cardholders, both in the UK and overseas, there were 1.6 billion transactions on debit cards in January 2020, 8.9% more than in January 2019.

The banking and finance industry organization also reveals that there were 721 million contactless card transactions in January 2020, a 12.3% increase from 642 million in the same month a year earlier, while the total value of contactless payments was £6.7 billion in January 2020, a 13.6% increase from £5.9 billion in the same month in 2019.

“Even before the coronavirus pandemic, we were already observing an ongoing revolution in consumer habits“

Game changers for secure contactless payments

Retailers and finance industry experts have been keen to harness the power of contactless cards and mobile-based payments during the pandemic because they see doing so as an important factor in improving the speed and convenience of purchasing goods. And these drivers will continue to remain crucial to driving footfall and improving the customer experience in the long term.

Security, particularly fraud prevention, is an important element of these new ways of paying, providing consumers and businesses with the confidence that their account, card, or device has not been compromised. One of the latest developments is the rollout of biometric technology.

Visa and Mastercard have been active in this area: the Visa Ready scheme and the Mastercard Biometric Card combine chip technology with fingerprints to verify the cardholder’s identity for in-store purchases. Newer payments firms are also getting in on the act. For example, Apple Pay’s Face ID and Touch ID enable users to secure contactless purchases above the £45 limit in shops, in apps and online. The Google Pay app adopts a similar approach, supporting facial recognition in addition to fingerprint identification.

Other security developments include tokenization and dynamic card verification value (CVV) technology. Tokenization enables banks to turn an account number into a token that prevents identification fraud. These tokens can be placed in physical devices or used for e-commerce or contactless transactions made on mobile phones. Dynamic CVV technology is becoming a game changer for secure online payments, replacing the static three-digit CVV number with an electronic display screen that automatically generates a new CVV number.

Innovative cards and sustainable solutions

Shows online payment security with a side view of male hands holding credit card typing numbers on computer keyboard while sitting at home soft focus, flare sun light, cross process image

The payments sector has continued to build on the developments in secure smart card (EMV®) standards. Indeed, smart card technology has proven to be the access point for a range of technology offerings, such as mobile wallets and big tech card programs, including the Alipay payments system offered by Alibaba. The rise of fintechs and big techs is further driving many developments in the sector, turning innovative technological ideas into customer-friendly ways of paying. Shifts in regulations have also affected the payment technology space, including PSD2, which came into force in Europe in 2019.

In recent years we’ve seen a progressive change in consumer behavior as digital natives have come of age, demanding high-speed, always-on technology that is also socially responsible. Customers have become less loyal to traditional, well-loved brands and are more prepared to do their own research before making a purchase, whether it’s a holiday, a vacuum cleaner, or any other item.

As a result, international transactions have rocketed, demand for sustainable products and services has escalated, and payment technology firms have had to respond by offering attractive, ethical, must-have services, such as innovative credit cards, sustainable solutions, and new form factors.

Just as retailers have had to respond to changes in demand on the high street by reinforcing their online presence, so too have banks, which have faced the additional challenge of new, lean market entrants that can adapt quickly to change and innovations. The COVID-19 crisis has brought into focus the importance of technology in our daily lives and has led to even more people from every age cohort turning to new ways of shopping and paying – whether it be online via credit cards, EMV®, or contactless mobile payments.

Who’s the new kid on the block?

Many of the technologies that have been rolled out over the years have been described as game changers. Contactless payment that uses near-field communication (NFC) hit the mainstream some time ago and, since its introduction, innovations such as new form factors and robust user-friendly security have gained traction in the payments world.

But it’s no longer only about paper dollars, euros, pounds, and yen. There’s another new kid on the block, one that is widely seen as the digital cash of the future: CBDCs, which can support financial inclusion, competition, efficiency, security, and innovation in payments. They can also avoid the risks of new forms of private money creation, support a resilient payments landscape, and improve the availability and usability of central bank money.

Published: 23/07/2020

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