How does contactless payment work?

Contactless credit and debit cards use a combination of traditional EMV chips, along with a contactless chip and RFID antenna. In the case of digital wallets, the smartphone contains a pair of chips, one that accesses and encrypts the card information, and the other, a near-field communication chip that transmits the card data to complete the transaction. The digital wallet is installed on a mobile device, enabling users to manage funds and pay with their credit card accounts.

Tap-and-pay worldwide

Europe is the global leader in the use of contactless cards with nearly one in two transactions contactless. In the UK, the number of contactless transactions rose by 31% in 2018 when compared to the previous year. According to the UK Trade Association, eight out of ten debit cards and six out of ten credit cards are contactless today. The use of contactless cards has received a major boost in the UK since 2015, when the London Transport System began accepting contactless payments.

In Canada and CEMEA (Central Europe, Middle East and Africa), nearly 60% of face-to-face transactions are concluded with a tap. In Asia Pacific, contactless payments constitute more than one-third of face-to-face transactions.

Contactless payments in the US

Up until recently, the US has lagged behind Europe when it comes to contactless payments. However, at the end of May, New York became the first US city to enable subway and bus riders to start tapping a contactless bank card or their mobile wallet to pay fares. The adoption of tap-and-pay technology in cities like Boston, Chicago and San Diego should give contactless payment further impetus.

Issuers jump on the bandwagon

Visa has announced that it expects 100 million of its cards to be contactless by the end of this year. The network’s real-time debit service Visa Direct is said to be driving usage and expanding use cases and geographies.

JPMorgan Chase & Co. stated that it has already issued 20 million contactless Visa credit cards as part of a rollout that began earlier this year. The bank added that tap-and-go debit cards will be on offer later in the year. Wells Fargo and Bank of America are also expected to start issuing tap-and-pay cards in 2019.

Payment ease reigns supreme

The rising popularity of contactless payments is inevitable, and is certainly not a passing trend. Today’s customers demand easy payments as a matter of course. As they carry their smartphones everywhere and utilize them for multiple purposes, it only makes sense that they will aspire to use them to complete transactions with super fast checkouts and a single tap. So contactless will definitely play a major role in payments in the years to come.     

Stablecoins are pegged to major international currencies, thereby preventing the extreme fluctuations associated with cryptocurrencies. This means that the value of the coin  would remain steady regardless of demand levels. According to recent reports, Facebook is planning to launch a full payments network across its messaging apps, and is currently talking to Visa and Mastercard to bring them on board. It is also in the process of raising $1 billion from major banks in order to fortify the coin against currency fluctuations.

In-app payments for a readymade audience

With a built-in audience of 2.5 billion, Facebook will be able to revert its revenue model from ad-based to payment-based and transaction-based. The company recently announced plans to launch its first stablecoin project in India, where WhatsApp has 200 million users.

India is the perfect location to initiate the project because a large part of the population already prefers to use mobile payments. In addition, many Indians are unbanked, making an in-app remittance payment method ideal.

Frictionless payments through a global mobile commerce system

While India is a good starting point, the concept of frictionless payments through a mobile commerce system anywhere in the world is hypothetically a winning formula. This type of system has already proved itself for P2P payments, but a built-in e-wallet could significantly facilitate payments for online merchants and their buyers, and adopt a model similar to China’s WeChat.

Will it work?

While in theory all this sounds feasible, there is no guarantee that the attempt will succeed. For one thing, cryptocurrency is based on decentralization and has no controlling owners. Facebook’s new stablecoin would be controlled, by Facebook, of course. There are also crypto-related regulations that cannot be ignored.

In addition, several global competitors like New Telegram are hot on the heels of Facebook. Not to mention that TikTak and Toutiao are currently eroding Facebook’s global app grip.

Is this a crypto revolution or just a blip? Time will tell.     

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