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New Innovations In Online Payments

New Innovations in Online Payments

The way consumers pay for products online is changing to keep pace with the ever-evolving online shopping experience. Concepts such as the eCheck never caught on with the mainstream online population, meaning the way consumers paid for products online needed to be reinvented and not copied from traditional retail methods. Let’s take a look at some of the most current payment technologies and ones which may not be too far away…

An iPhone adapter allows EMV cards to be read by mobile devices, Square is a popular reader used in the United States for “swipe” cards with magnetic strips.

  • EMV (Europay, MasterCard, and VISA) or chip credit cards – While many residents of the United States still use magnetic strip credit cards (often with a 3 or 4 digit “security code” on the back) their European counterparts now frequently use cards with a security chip built in. Instead of swiping the card, an EMV card is inserted into a card reader (shown above) and the consumer must enter a PIN code to validate the card. When used online, EMV cards use a dynamic cryptogram to protect card data from being skimmed and stolen. This process can sometimes require the computer or device to have a special card reader (often via USB or built into the keyboard) which the card can be inserted into for authorization. Although some logistical issues with EMV cards may seem complex, the security benefits can easily outweigh the inconvenience of specialized card readers. EMV technology is finally starting to enter the U.S. as large banks have finally started to issue EMV cards and both VISA and MasterCard have a unique PIN system for online payments which currently requires consumer opt-in but could become standard as soon as 2013.
  • NFC (Near Field Communication) payments – NFC payments allow consumers to purchase items directly with their smartphones which contain key payment information stored securely within applications. NFC payment applications (such as Google Wallet) use radio frequencies to communicate and transmit information between consumers and retailers…

While this technology is primarily used in retail settings it can be critical to learn more about customers and increase subscriptions to loyalty and rewards programs both online and offline. One major downfall of NFC payments is the signals can be monitored and even modified by outside parties and misplacing a NFC-enabled smartphone can create identity concerns if payment information is not stored securely.

  • Online payment services have gone multichannel – An emerging trend which is being received well by consumers involves using online payment services, such as PayPal, not only online but also in-store. While these accounts need to be created online and can often require a lengthy authentication process, once funds are connected payments can be made easily due to its direct integration with a diverse number of retailers. For example, Home Depot customers can pay in-store using their PayPal account simply by entering their phone number and PIN code…

While this technology is still being implemented in more Home Depot stores across the United States it allows consumers to purchase both online and offline using the same service and information. A major benefit of this truly “device-free” payment method is the ability to cut consumer technology out of the picture altogether – instead of updating systems and educating consumers about EMV or NFC technologies the simple phone number and PIN authentication system is similar to ATM technology (minus the card of course). Alert e-mails and text notifications immediately after purchases can also help minimize fraudulent purchases. Companies are also considering linking promotions to PayPal accounts to simplify the discount process.

  • Payments and identification could become one – In the more distant future and depending on privacy concerns a strong link could eventually form between personal identification and payment technology. “Smart cards” (similar to EMV cards) which store both personal and financial information could appear in the more immediate future, where one card alone can hold important medical, identity, and payment information in a digital format. Payment identification technologies such as fingerprint scanners have been used in retail trial runs and may eventually be among the most secure methods for authorizing payments both online and offline.

The line between online and offline payments is becoming more and more blurred, especially due to the increased usage of mobile devices. It may seem as though NFC technology makes the most sense given this mobile growth, but integrated phone/PIN number systems (such as the PayPal and Home Depot trial) may be an even simpler payment method. The “swipe” era may be coming to an end soon, but how soon depends on the abilities of retailers and their payment partners to understand and implement new payment technologies.