Friction-free payment boosts efficiency for consumers and businesses alike

By Ralf Gladis, CEO, Computop

When the spending limit of a contactless card was raised last autumn from £45 to £100 customers were frustrated if a retailer failed to accept the new threshold immediately. There were often valid reasons for it, including the retailer’s ability to update its payment terminals quickly, but such is the UK consumer’s preference for contactless, any delay was bound to be treated with irritation.

The introduction of contactless payments, which started in 2007 with a limit of just £10, has been gradual, but as the limit has increased over the years, so too has the public’s propensity to use this friction-free method of payment.

There are a number of reasons for the exponential rise in contactless purchases. Convenience is one; the security that is in-built with the process, whether using a debit card or a mobile device to tap-and-go, is another. However it was concerns about the spread of the COVID-19 virus that pushed many consumers away from using cash, instead adopting contactless wherever possible.

Now that the concept is so well established, we are beginning to see other ways in which contactless is making our lives easier. The Internet of Things (IoT) means that as well as payments on smartphones, other devices such as smartwatches and key-fobs, are also becoming payment-enabled. We can order items, including groceries or tickets to events, using Alexa or Google Assistant and pay for them with a simple voice command

Myriad of benefits

Service providers of all kinds, from retailers to petrol stations are adopting IoT enabled payment mechanisms because they recognise the positive impact on customer satisfaction. But the benefits go far beyond that because the automation of payment also improves operational efficiency, lowers costs and increases revenue.

In consumer scenarios, the use of contactless is enabled by saving debit card details as ‘tokens’ into devices whether that’s an iPhone, a smart speaker or a smart printer. Tokenisation replaces the number and all the relevant data from the customer’s card with a unique identification symbol which ensures credentials are untraceable and secure.

In the future, however, it is likely that the payment process will become even less contact-driven and even more silent and invisible. Biometric data from a fingerprint to a facial scan will be all that is needed to buy groceries in shops with no checkouts or a cup of coffee from a robotic barista. Recent research found that 51% of UK consumers would even consider making payments using a chip implanted in their hand provided it met medical safety and privacy protection.

Automation improves payments in B2B scenarios

But what about contactless in commercial and industrial settings? Here the demise of traditional payment methods such as cheques and cash, has been accelerated by digital transformation. Organisations not only want payment processing to be contactless, but they also demand improvements in efficiency and speed and automated processes that reduce systemic risk.

Once again, the IoT has a large part to play in delivering this level of payment transformation for B2B transactions. At a very basic level, automation allows an order for stock to be replenished and paid for when inventory reaches a pre-determined level, and this is already actively used in retail, manufacturing and warehouse scenarios. Mastercard predicts that the near future will bring an even more connected payments environment. In a recent report they see fundamental cash cycle functions communicating and exchanging transaction information in real time; systemically driven intelligent payment choices that align with the best interests of buyers and suppliers in any given situation; the growth of real-time payments; and the establishment of full, ongoing adaptability to technology and the latest payment types.

But there are signs that even more ingenious methods of contactless or automated payment are being developed. In the automotive industry, for example, smart cars will be able to pay for fuel or toll charges automatically. And in 2019 Commerzbank launched a project which tested ‘cash on ledger’ machine-to-machine payment processes between an electric charging point and Daimler Trucks. The bank issued Euros on a blockchain and provided Daimler Trucks with ‘cash on ledger’ to process the payment. Both of these examples show that payment can be carried out successfully without any human interaction.

Setting new standards

Contactless payments, which so often are referred to only in the context of consumer transactions are clearly driving transformation at all levels and in multiple different industries. Fundamentally, payment service providers, like Computop, and banks are working hard behind the scenes to facilitate faster, frictionless payments that not only improve the consumer experience on a day-to-day basis but also enhance logistical efficiency and set new transactional standards for businesses.