Digital wallets and vein scanners: How we'll pay for things in the future

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Thursday, August 21, 2014 - 9:05am

 How did you pay for your coffee this morning?

If you're in San Francisco, perhaps you waved your smartphone over a payment terminal; if in London, maybe you momentarily tapped your funky-looking wristband on it; if in Nairobi, you probably just sent a text message. And if you're in Lund in Sweden, maybe you simply swiped your palm.

True, in any of these cities -- and in fact everywhere else -- you're most likely to reach for your old-fashioned wallet and flash those cash or debit cards you're so used to. But while this form of payment is far from dead, the way we use money on a daily basis is changing.

Whether it's via contactless cards and mobile phones, or even wearable gadgets and biometrics, new ways of paying and spending are increasingly muscling their way into the mix, leading to a rise in cashless transactions.

"There's a lot of different technologies that people are testing and bringing to enable people to pay in new ways," says Sarah Clarke, editor of NFC World+. "It's not quite clear what the overall winner will be -- or even if there is one overall winner -- because the way to pay in a supermarket might be different to the way to pay in a coffee shop," she adds. "We are in a real world learning phase at the moment."

So, what are some of these emerging payment options vying for your attention?

Wave and go

Unsurprisingly, the area that's currently seeing the biggest traction in retail purchases is contactless cards -- these typically allow you to make quick and easy payments for low-priced goods by simply waving them over the reader at the till.

Even though the technology, also known as near field communication (NFC) has been around for several years now, it's only recently that contactless cards have started gathering pace. Last year, a report by Juniper Research said that 249 million cards will be used for contactless payments in 2014, driven by rising adoption in countries like the UK, Australia, Canada and Poland. In Britain alone, spending via contactless payment cards hit £109.2 million last March, up three times compared to a year ago.

"We're starting to see a proliferation of point of sales terminals and contactless cards deployed," says Alex Rolfe, managing director of Payments Cards & Mobile. "That in itself is going to be a critical driver for the next stage," he adds, "which is mobile contactless payments."

Indeed, the rising popularity of contactless cards may as well lead to their demise. Experts point out that the growing adoption of the technology could eventually contribute to us becoming less dependent on plastic as more innovative forms of payments start using it.

Mobile rising

Naturally, mobile is at the heart of this -- and the options already on offer are far from limited.

"With mobile phones," says Clarke, "there's a wide range of different routes that people are taking to see which one is going to be the one that catches on most with consumers and with retailers."

One of them is NFC, which allows customers to use their smartphone as a substitute to contactless cards. Google Wallet and mpass are just some of the mobile applications using NFC -- in fact, the technology has long been touted as the next big thing, but the uptake has been slower than anticipated.

Part of the problem is that not all smartphone manufacturers have supported the technology -- Apple, for example, has yet to release an NFC-equipped phone.

Another stumbling block has been a tug-of-war between mobile network operators and payment service providers over customer ownership.

Traditionally, contactless mobile payments have been enabled via a smart chip -- called secure element -- usually residing in the device's SIM card. This made mobile network operators intrinsic to the NFC ecosystem. It also allowed them to start offering digital payment solutions, much to the dismay of financial institutions.

Yet, the banks' position has been given a boost recently after the introduction of a new technology called host card emulation (HCE), which permits the hosting of payment credentials in the cloud. This allows banks to deploy mobile NFC products bypassing the need for a secure element -- crucially, Visa and MasterCard have embraced the technology while Google has included in its Android Kit Kat operating system.

"Whether in all circumstance that's going to be the right approach to pay is the subject of debate at the moment," says Clarke. "The core of the debate is over whether somebody's payment details can safely be stored and used in a cloud-based environment, or if we still need to have a security module in the phone itself."

Future is here?

Away from NFC, another futuristic option being mooted is Bluetooth low energy (BLE). Already tested in the marketing arena, the technology allows the transmission of messages directly to a nearby smartphone.

Yet, lately it is also being used in payments -- PayPal has recently introduced Beacon, a BLE hardware device that allows buyers to conduct hands-free transactions without checking-in. The idea behind it is that upon entering a store, the PayPal app on your smartphone seamlessly connects with the PayPal Beacon. A vibration or sound lets you know that you're checked in, while paying for goods doesn't require any cash or cards -- all you need to do is verify the purchase using voice recognition.

If this all sounds too futuristic for you, how would you feel if you just used your veins to pay for goods? After being used to verify the IDs of smartphone and computer users, as well as in airports and government buildings, biometric systems have also started entering the fast-moving world of payments.

Developed by Swedish engineer Fredrik Leifland, Quixter is a new biometric solution that aims to eliminate the need to carry a card or device completely. It allows you to make a transaction in just a few seconds by determining your ID based on the vein patterns in your palm -- all you need to is enter the last four digits of your phone number and then simply press your hand over the device's sensor.

"Combining biometrics and mobile phones is something that could also take off really well," says Clarke. "Yet, it is very early in terms of saying which one people are going to favor."

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