Five technological advances that will transform how we pay

17.12.2021

What does the future of payments look like? Put simply, in an increasingly digital global society, we will have more choice in how we pay.

But this must never come at the expense of trust. A consumer must completely trust that they can access their money and seamlessly purchase goods and services both however and whenever they need to. They must trust that any payment device they use integrates seamlessly and is reliable.

Trust is essential when new players and OEMs come to market. It is hard won and easily lost, and the single most critical part of any brand’s success. This is why trust underpins the entire future of payments, and will incorporate advances in card payments, biometrics, green credentials, digital currencies and quantum computing.

1. Biometrics

Authentication and security must constantly evolve to remain one step ahead of fraudsters. More face-to-face transactions are taking place contactlessly since the pandemic, and additional layers of authentication are necessary so that a contactless payment card is protected from being used by criminals.

Biometric security emdedded in a Secure Element connected with a biometric sensor in a dual interface card can be used as an effective combination of convenience and security and could be the next big thing in proximity payments. Its appeal is that biometric data cannot be forgotten by the cardholder and enables an entirely touchless experience.

Biometric Payment
Biometric Payment
Biometric Payment

This is a huge benefit for banks, merchants and consumers alike, drastically increasing fraud protection at a time when concerns have been raised about the fraud risk of higher contactless payment limits. Contactless biometric sensor cards can reduce this risk in proximity payments and put security back in the hands of genuine cardholders.

2. Green Credentials

Banks and other financial institutions are under greater pressure than ever to demonstrate commitment to greener payment schemes and Corporate Social Responsibility (CSR). The ultimate goal for their card is to retain top-of-wallet status and banks can benefit from higher customer retention if they can show their commitment to greener practices, helping issuers and banks to become carbon neutral.

Differentiating from growing competition is not easy but offering greener materials, such as reclaimed ocean plastic or wood, can provide an enticing option for end users. ABI Research expects consumer demand to help deliver a 400m reduction in PVC cards shipped by 2025.

A significant innovation supporting the manufacture of greener contactless cards will be an integrated, small antenna that can talk to a larger antenna in the card via an air connection. Avoiding a physical connection will make it far simpler for card manufacturers to embed antennas into cards – without affecting contactless performance or security – and enables them to make cards out of any material they want.

It’s important to deliver a strong cardholder experience. Cards made from high-end metal materials help issuers retain affluent customers by offering them a device with a distinguished look and feel (something weighty, robust and valuable). Meanwhile, tech-savvy consumers can select cards with an embedded LED, which lights up when it enters the field of range for successful contactless transactions.

Card payments are increasingly sophisticated, secure and attractive, but in the next couple of years we will have even more choices in how we pay in an increasingly digital global society.

3. Wearables and connected devices

Wearable Payment
Wearable Payment
Wearable Payment

Touchless payments also enable a new world of connected devices. Market intelligence firm IDC reported that worldwide shipments of wearable devices reached 153.5 million in the fourth quarter of 2020. This number will continue to grow.

Rings and bracelets will join smartwatches and fitness trackers as NFC-enabled payment devices. We will see additional interfaces such as BLE (Bluetooth Low Energy), UWB (Ultra-Wideband), and Wi-Fi provided for wearables in ultra-small formats, operating at extremely low power.

This will offer huge opportunities for device manufacturers to extend their customer base through enticing new experiences like automated, location-based payments, making contactless truly touchless. New use cases enabled by technologies like UWB will not only bring enhanced seamless interactions between customers and merchants, but will also foster a multitude of additional payment transactions in public transit, mobility and event ticketing.

Tokenised payments – where the customer’s card details (known as Primary Account Numbers) are replaced by a ‘surrogate’ value so that the account number is never disclosed in plain text – are already widely used and will provide added trust for consumers making wearable payments.

4. Digital Currencies

Governments worldwide are currently looking at how to regulate new forms of digital money and we can expect to see digital currencies become de facto currencies in some countries within this decade.

However, to keep sovereignty over the financial system, central banks will need support for digital ledger technology (DLT) and digital wallets. They face competition from organisations like Facebook, who are aiming to provide ‘stablecoins’ (digital currencies whose value is pegged to a fiat currency, such as the U.S. dollar), for person-to-person payments, worldwide.

One role of hardware-based security mechanisms will be to generate and store the private keys (passwords) consumers will require for digital currency wallets. This will be essential for mass adoption of digital currencies, to avoid consumers losing vast sums if they forget their password. A chip card holding a CBDC must support security functionalities such as secure key generation and key management, signing methods, PIN protection/authentication and more functionalities needed for a DLT or e-wallet solution.

Another intelligent way to protect a CBDC wallet will be the introduction of biometric sensor cards offering the opportunity for a “cold wallet”. This is an offline, physical ‘wallet’ securely protected by biometric data that is stored in the Secure Element, connected to the sensor of the card. It can securely store a user’s private key offline, reducing the risk of them being exposed via viruses or malware.

5. Transformations in computing

Today, most of the world’s electronically encrypted data – including payment information – is protected using mathematical equations. Breaking these encryption models would be too difficult for computers in a practical length of time. However, the phenomenal power that quantum computing brings will completely transform how payments need to be secured in the future.

Common data encryption like DES (Data Encryption Standard) and RSA security, largely expected to be followed by Advanced Encryption Standards like AES-256, will not go far enough. Advanced cryptography like AES-512 will be required sooner than many might think.

IT Data management
IT Data management
IT Data management

What this means is that quantum-resistant cryptographic support is needed. It will be imperative for payment card, wearables and other device providers to use quantum-resistant chip sets to support these new specifications, without harming the tap-and-go experience for shoppers and merchants.

These are just some of the significant – and exciting – changes we can expect to see in the world of payments in the coming years. Infineon invests billions in R&D each year to stay at the cutting edge of innovation, enabling banks, merchants and device manufacturers to facilitate ever more secure and convenient payments for consumers, creating trust and enabling choice in digital transactions.

Ursula
Ursula
Ursula

Author: Ursula Schilling, Director, Payment Ecosystem at Infineon