Card tech evolution 2020+

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.

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.

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