The Future of Electronic Payments
As technology advances, transactions between companies and various end-users are changing too. Electronic payments systems have changed our shopping habits. A general acceptance of online transactions led to the development and use of more mitigated virtual currencies. However, contactless payments and payment apps are the link to the future payments world, directly from our smartphones.
Being surrounded by providers offering such an incredibly diverse payment options, just to make commercial transactions faster and easier, brings us to speak about terms like “e-money”, “digital wallet”, “e-cash”, “e-check” or “virtual money” without thinking exactly what they mean. According to the 2EMD (the second electronic money directive) issued in 2011 by the UK Financial Services Authority “Electronic money (e–money) is electronically (including magnetically) stored monetary value, represented by a claim on the issuer, which is issued on receipt of funds for the purpose of making payment transactions, and which is accepted by a person other than the electronic money issuer. Types of e-money include pre-paid cards and electronic pre-paid accounts for use online”.
Private e-currencies may provide extra security by using gold, as it is the case of digital gold currency. Others may just work independently. E-money may be organized under centralised or decentralized systems. The first category includes EPS providers like PayPal, WebMoney or uCash and they trade their e-currencies directly to the end-user, while others in the same market may use a third party. Decentralized systems allow payments at very low cost without needing centralized payments processors. These systems are network oriented peer-to-peer electronic monetary systems. Relevant for this category we may name Bitcoin or Ripple. Not surprisingly, offline electronic payment systems have been evolving along other alternatives. Offline e-money supposes that the merchant can accept money direcly from the user, without entering in contact with the bank. The prevention of double-spending and of cheating merchants is the key issue of such systems.
Electronic Payment Systems and Providers
An electronic payments system includes an authorized institution for issueing electronic money, the parties accepting this type of payments system and the technology designed to run it. Often a third party is allowed to finalize the payment for the orderer; these are called PSPs (Payment Services Providers).
Payment services providers may be specialized on transactions via internet, on micropayments and money transfers between users or payments to online shops, using e-money (Amazon payments, Bee Token, Bitcents, Google Checkout, Intuit Payment Network, MoneyBookers, Pay with a Tweet, PayPal, Xoom, etc.), or using virtual debit and credit cards (like Cred-ex, ePasseporte). Some may focus on B2B transactions (for example: EFD, JPMorgan Xign, SVPCO, The Clearing House). Webbased payments to online shops have their dedicated suppliers too (such as Click2Pay, DigiBuy, Payclick by Visa, etc.). However, some widely known providers – like MoneyBookers, and PayPal, serve most of electronic transactions types.
M-payments or mobile payments are transactions completed with the help of a telephone or a smartphone. Being a more recent niche on the payment systems market, it also has some favoured players. Certainly the degree at which we are currently using our mobile phones will give a great impulse to this solution too. Across the world, consumers still lack trust in too innovative payment systems, due to the security risks involved in it. However, solutions like TeleWorld, Billing Revolution, mBox, mCheck, MobiPay, Monitise, PayFone, SmsCoin are gaining trust.
An even more innovative concept is rising on the horizon: contactless payment. This happens mainly grace to the latest NFC (near field communications) developments. We can now transact with family, friends, colleagues and employees by simply tapping together our smartphones.
Payment habits are changing
Driven by the innovation in the electronic payments field, our day to day shopping and payment habits are visibly changing. You can order and pay your desired book or gift by a simple click on your computer or by tapping your smartphone. The NFC enabled systems will have an even greater impact on the way marketers will promote products and services to the consumer. Having the ability to track your buying locations you may be informed about special offers just when passing by that exact shop. Public projects in some of the most developed countries in the world are implementing NFC enabled payment solutions along other e-payment alternatives.
MMOGs (massively multiplayer online games) available now on various mobile devices consolidate the business around their persistent worlds where real-time actions are required. Virtual economies based on virtual currencies led to virtual-real currencies exchange. Transactions with Aion Kinah, World of Warcraft Gold, Warhammer Online Gold, Start Treck Online Credits, Eve Online ISK, City of Heroes Influence and other game currencies are common facts for gamers around the world.
Security and Trust
The security of electronic payment systems is by far the most desired and important characteristic to be achieved. The banks are interested in preventing fraud, shops and merchants are interested in being deposited the due amount and finally the customer who is making a payment and a withdrawal from the bank account wants to be sure that unauthorized persons are not allowed to access his/her account and to avoid lossed caused by eventual theft. Along with digital signatures and blind signatures, we are now witnessing the deployment of the anonymous payment systems.
On the other hand, new solutions regarding payments are being received with scepticism. Nobody wants to put at unnecessary risk their accounts. Building trust in this arena takes time and positive experience with the system. Yet, mobile commerce is growing as the next booming phenomenon and both shops and buyers should prepare for it. As Visa announced this year to support the adoption of dynamic chip authentification technology, we cannot but wait and see what is next on the EPS timetable. We might be surprised!