From coins to NFC

From 600 BC coins made of gold, silver, copper and bronze brought new practicality to the exchange of goods and were the first form of money as we know it today. After the transition from coins to banknotes, the biggest change then came with the advent of credit cards. Today the next wave has come with the emergence of mobile payment systems, and payments made with mobile phones are spreading rapidly.

With the emergence of smartphones, the use of mobile phones as credit cards will soon be increasing dramatically. This will allow us to offer options that have not yet been seen and might become as popular as recent novelties offered by technologies such as the QR code. According to GSMA, mobile data usage increased by 70% in the last year alone. Where in the past we couldn’t leave home without taking our wallets and mobile phones, we will now be able to take advantage of payment systems integrated with our phones and use them to keep both our communication and payment tools with us at all times.

Phones equipped with NFC technology will no doubt speed up this transition towards mobile payments. The biggest obstacles currently slowing down the adoption of payment solutions in smartphones are more to do with security, trust and a lack of widespread adoption, rather than any technical deficiency. However, terminals being given by banks to businesses are already capable of accepting contactless payments and smartcard systems used in public transport have to some extent already begun to popularise such usage.

A turning point has potentially been reached by the Turkish government’s official notice concerning Payment Registering Devices, which requires all cash registers to be replaced in the coming years. All those who have invested in this new direction already have contactless payment options built in to their cash registers and terminals. Customers will soon be able to leave their wallets at home knowing that any place where they may need to spend money will accept contactless payments.

Another obstacle standing in the way of the adoption of NFC technology in mobile phones is that once a phone runs out of battery, it cannot be used to make payments. There are currently several approaches being explored by people attempting to solve this problem, including research into longer-life batteries, phones charged by solar energy, and contactless card adapters with separate batteries. This year contactless payment systems are primed to make a breakthrough in public consciousness. The increasing numbers of payments made by debit and credit cards even for small amounts provides the basis for this transition. When we add in the fierce competition between companies working in the financial sector looking to increase profitability, it is easy to see that there are several powerful drivers favouring adoption, and that contactless technologies have now entered a mature stage of their development.

The adoption of contactless payments and the latest technological applications used by banks and the Interbank Card Centre also help to reduce the power of the black economy and the unfair competition that comes with it. Another advantage is that contactless payment systems offer a secure and convenient option to passengers making even the shortest journeys.

However, the expansion of contactless payment systems is just as reliant on customer convenience as it is on the benefits to companies. The fact that companies offering corporate integration solutions have placed NFC so high up on their agendas can be seen as further proof of the importance of this technology.

Contactless payment systems will also be used to carry out a significant number of transactions that take place outside of the banking system, and will do so in a simple and convenient manner. Contactless payment systems will also appeal by shortening the waiting time in credit card transactions. Innovative solutions such as electronic receipts and mobile point of sale terminals are all influencing and shaping the contactless market.

The number of payments made using the mobile payment systems operated by telecom providers have now reached an average of two per user. It would not be surprising to see this number increasing exponentially and taking a much bigger slice of cashless transactions. In fact, Gartner already predict that between now and 2016 mobile payment transactions will increase by 42% per year.

In short, concerns about security and a lack of market penetration are now fading and we are experiencing significant developments in digital payment systems. Of course this does not mean that security will be ignored, and in fact more advanced security applications are now being developed that offer a big difference: the security of payments no longer relies on the customer’s patience and time.