Payments beyond of cards
The current health crisis brings digital payments to the fore. Consumers are looking for contact-free payment methods [Recommended by the Belgian government], and new players in the financial tech industry are battling with each other to find the most compelling answer to that need.
Cash is still king in Europe
Even though cash is king in many European countries [2018 World Cash Report by G4S], “digital” alternative payment methods are still increasing rapidly. In the Euro area, card payments accounted for 46% of the total number of non-cash payments, while credit transfers and direct debits accounted each for 23%.[Payment statistics from ECB]
Contactless card payments
Yet not all of the alternative payment methods are contact-free. For example, debit and credit card transactions require a PIN entry at the Point of Sale (POS) terminal for transactions above the threshold of 25 Euro (Belgian threshold; The threshold differs from a country to another).
How does contactless card payment work? EMV cards contain an embedded integrated circuit that stores encrypted information about the account and can process the authentication protocols with the payment terminal. EMV contactless cards (ISO/IEC 14443 compliant) communicates via Radio Frequency Identification (RFID) technology. So, we have an RFID system, where the payment terminal plays the role of RFID reader, and the smart card plays the RFID tag role.
The contactless payment technology came in handy during this health crisis, and banks have been quick to increase the contactless payment threshold to 50 Euro [Worldline communication].
The problem with thresholds is that they’re not sufficient for all types of purchases. Let’s suppose a cardholder is doing the groceries for their family, the cost may easily exceed the 50 Euro threshold, and thus they’ll have to go through the PIN authentication at the terminal.
Mobile payments
This is why many cardholders are looking for mobile payment solutions. Apps, such as Payconiq by Bancontact, are used by Belgian cardholders as an alternative to cash and card payments for person-to-merchant (P2M) transactions. It is not surprising that the app is gaining popularity; It offers a solution with Strong Customer Authentication (SCA) yet smooth experience. Indeed, no contact is needed with the payment terminal, a QR code is displayed on the terminal screen (or another hardware, it depends on what solutions the merchant is using), and the cardholder will only need to scan it with their mobile, enter a PIN or use fingerprint and confirm the payment.
Besides P2M payments, mobile payments are also used for person-to-person (P2P) payments, avoiding the inconvenience of cash. In the USA, P2P payment apps, such as Venmo, are widely used and popular. The local alternative in Belgium is Payconiq by Bancontact.
Withdrawing cash from an ATM, is another functionality that a cardholder can do without using a credit/debit card. Some banks are already offering cash withdrawing services with their mobile app (You may want to double check your bank mobile app to see if this functionality is supported). The consumer has to use their mobile to scan a QR Code displayed on the ATM to confirm the transaction.
QR codes everywhere?
I’ve mentioned QR code based solutions for P2M, P2P, and cash withdrawing solutions. They seem to be everywhere! Their popularity is not surprising, it’s a simple and secure solution at the same time for the consumer, and a cheap solution for small merchants to accept non-cash payments.
