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Credit Card Security- Its History And Evolution

If you’re a younger reader, you may not realise the amount of changes that have happened to the card to get to where we are now. In truth, the evolution to Apple Pay and Contactless has been a steady one with lots of trial and error.

 

The Beginning

The credit card system’s origins can be traced back to a conversation between a restaurant owner and Frank McNamara, when the latter had left his wallet at home when needing to pay for a meal. His wife covered the tab and he left thinking there was definitely another way. When talking about how he didn’t want this to happen again, he spoke to his lawyers about his idea and formed the first type of credit card – Diner’s Club.

Back then, however, the limitations of computing made a lot of difficulties. For a start, nobody could confirm the buyer was the owner of the card, with the early versions just being printed paper with a name and signature, no built-in chips or expansive database. The card wasn’t an instant payment either, it was essentially an IOU at first.

 

Many then followed in Diner’s Club’s footsteps. American Express and Carte Blanche worked in much the same way, recording a monthly bill of all payments made through the card’s services, and were categorised as travel and entertainment cards.

It wasn’t until BankAmerica and InterBank Master Charge cards, which would eventually evolve into Visa and MasterCard respectively, that true credit cards fully came into existence. The banks would allow their customers to pay the bills from their transactions over time through the cards’ credit scheme.

 

In the 1950s, when computers were a rarity, only telephones could be used to confirm a purchase before making the sale. As expected, fraud eventually appeared for these transactions, leading to the first measures to prevent this being brought in. The first attempt at this was through voice authorisation. The companies who manufacture the cards would have a call centre that merchants would have to call in order for a transaction to be made. This system has survived to the current day, even if now relegated to a secondary option.

 

Audio responses by the card issuers were next, in which merchants would call them to enter the card holder’s information, which would verify the purchase. When touch-tone phones became the norm, this changed to merchants entering the information using the keypad, with the system then either issuing an approval code or declining it. Despite the improvements made to reduce fraud, card issuers wanted to make the purchases even more secure and haven’t stopped working on new ways to avoid this danger.

 

The Rise Of The Chip

It was then that magnetic stripes became used on the back of cards, carrying information that could identify the card holder and either approve or decline the purchase based on the current card holder’s information. Whilst an improvement, it carried its fair share of problems, due to it being easy to use once stolen and can be duplicated easily.

Due to these problems, the Chips were developed. The first case of this was a joint project between Europay, MasterCard and Visa in Europe called the EMV. It encrypted the data during the transaction by creating a temporary token to send to the company authorising the card to verify the payment. Offline transactions at the time of the chip’s introduction weren’t as secure, but required less steps and were a useful option if a merchant didn’t want traffic to become too much for their network.

 

Though at first contact chips requiring the chip and PIN format was the only option and required physical contact to work, contactless has now appeared and become a staple form of payment.

 

Contact Chip

There’s little that needs to be said on how Chip and PIN functions. You sign in to make a purchase with your PIN number after inserting the card and confirm it. There was originally the Chip and Signature option, though that quickly became irrelevant in Europe, and is starting to fall off in America. Signatures were too easy to forge, and most merchants couldn’t verify the signatures matched perfectly.

Both credit and debit cards now use the Chip and PIN system to enter into an ATM for a transaction, with the card issuer being able to inform you of whether or not your card is capable of using the system. In the rare case Chip and PIN isn’t an option, it will still be useable in Europe with human assistance.

 

Contactless Chip

Contactless chips use Near Field Communications (NFC) as their protocol, allowing for wireless communication with a terminal that is the cause of them needing only a tap against the transaction device.

As expected, the only real difference in use is that contactless cards are far faster.

The problem with the contactless option, however, is that someone with technology capable of Radio-Frequency Identification (RFID) can steal the information if close enough; being behind them in a queue, for instance. A metal or tinfoil card case is a good way to prevent this as the metal casing blocks the radio waves used in RFID.

 

Here, we reach the current state of card security. It’s evident that a lot of development has gone into bringing credit cards to their current form of payments and protection and though there is still room for improvement, we have reached a level in which most transactions can occur without the slightest worry.

 

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Pros and cons of a cashless society

In the current market, a cashless system is often promoted as the future of shopping- which it already is to some extent. A lot of countries are starting to adopt this slowly, with the intention of phasing out cash in the not too distant future. Here’s our list of things that are good and bad about it:

 

Why Go Cashless?

#1 – Crime Reduction

The phasing out of cash will eliminate a number of crimes involving money- think laundering, counterfeiting, bribery and the buying of things that would require untracked cash (from drugs to weapons). You’ll no longer have to have staff constantly counting money, and stores will be a lot less appealing to people for break-ins without cash in the till.

In fact, recent studies in the Access to Cash Review show that 36% of people consider cashless businesses an important part of reducing crime. Another statistic is from Paymentsense, in which 31% of business owners said that bringing in new technology for finances helped make them feel more secure about their business.

 

#2 – No Need For Banks

Going to the bank to deposit money can be quite the chore, especially if it’s far away. Many branches, especially in small villages, are disappearing one after the other. For example, the HSBC in the North Yorkshire village of Kirkbymoorside closed around two years ago and left the only option of withdrawing money through ATMs in local shops, forcing members to travel elsewhere.

Removing cash stops this problem, as it makes it a lot more convenient for users to live their daily lives without ever needing to take out money.

On the subject of finances, the cost of implementing credit services will lower after their use reaches a certain threshold, with the costs for most cashless businesses for their credit card payments only being 1% of the transaction.

 

#3 – It’s coming anyway

Compared to the good old exchange of cash, we’re now living in what the previous generation would see as a sci-fi pipe dream. Fingerprint and eye scans aren’t rare, tapping a card against a sensor is enough to make a payment and there is no sign of slowing when it comes to payment options.

 

Access to Cash Review has even said that current trends in e-commerce make 2026 the estimated year where cash’s use completely stops. In their most recent data, it’s been shown that cash only makes up 13% of rent payments, 10% for gas, electricity or water and 8% for TV licensing.

Meanwhile, cash makes up 86% of newspaper payments, and considering the outdated nature of this medium, it can be inferred that cash is the preference of the older generation. With that said, the fading away of cash will stay gradual and constant as time goes on, along with the switch to online news.

 

#4- It’s easier for tourists

No more converting! In a cashless world, people can just take their card travelling and won’t have to worry about losing a large percentage of your money every time you want to switch over.

 

#5- Stops using resources

Coins and notes are made out of a lot of materials, and we’d have a lot more copper, nickel and steel if we stopped production and melted down all our coins. Copper ranks as the third-most used industrial metal in the world after iron and aluminium, according to the U.S. Geological Survey (USGS), so it would be useful to not have to use so much on money.

 

Why Not To Go Cashless

#1 – Crime will always be a thing

On the flip side to what’s been mentioned, there are other forms of crime that will increase as cashless society becomes the norm, with shop-robbers being replaced with hackers. The data breaches in businesses have grown as they become less reliant on cash, with hacking also holding the risk of the leaking of personal information.

 

#2 – Potential problems for those with less access

Not everyone benefits from this system. Access to Cash has said that specifically 17% of the population will struggle when cash fades away from society. With cash machines closing down at around 300 per month, those who don’t have a bank account, or the internet, may find it increasingly difficult to live as they did normally.

It’s been found that cash can help poorer people organise budgeting better, and generally offer them peace of mind. On top of that, over 1.3 million people in the UK don’t have a bank account, particularly those in the teenage range and below. This is a thing that needs to change if we’re ever going to make the transition to cash-free.

 

#3 – Blackouts

Blackouts aren’t hugely often in the grand scheme of things, but still occur somewhere in the world once a day on average. This is a big issue in a cashless society, because it would mean nobody would have access to their funds.

For the many small businesses in rural areas, an untimely blackout could mean closing your business down for a brief amount of time, which is a pretty big reason to think about system stability before going completely cashless. That being said, things like this are bound to happen and usually get solved quickly.

 

#4 – Other teething problems

Without cash, there doesn’t seem to be a widely accepted way to tip service workers yet, but some companies do this well- like Uber giving you an option to add a tip while paying on the app. Charity boxes are also something that will have to evolve too, but there are already card accepting ones being created.

 

Conclusion – Which Is Best?

There aren’t any completely cashless countries yet, but this is changing, and we can find out the answer to this question properly over time, starting in Sweden. Both sides have many pros and cons, but I would say cashless sounds better in theory. However, we’ll see!

 

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Contactless- How will it evolve?

Contactless cards have been on the rise for the past few years and as far as tech has come, it can’t be denied that this is the best option for card payments. Being able to just tap your card against a machine for a near-instant payment is overall far better in terms of saving both your staff’s time and customers’ time.

That being said, it can still be improved. Here are a few things we can probably expect from contactless in the near future:

 

The Current Statistics

Whilst contactless payments have yet to fully dominate global trade, they are on a definite rise. A recent infographic by VISA showed that 40% of in-person payments are now done through contactless means. Statistics on moneysupermarket.com‘s website note that from their surveys, 59% of people find the push to accept contactless as the main form of payment is overall a more efficient option.

There are many places in which this option is becoming the majority. In Canada, the figure for contactless payments is 75%.

This rise in such a short span of time is a notable change in how the world pays for things, with many countries’ economies going from a single digit percentage to becoming half or more of payments within the span of two years.

There are some areas in which contactless hasn’t taken full form, however. In Latin America as a whole, only 25% of payments are contactless.

Based on previous trends in marketing, there’s a two-year difference between a new technology’s introduction and most of the population accepting it as the standard. That said, it can be anticipated that contactless may make up the majority of payments as early as next year, or at least grow considerably.

 

Amazon will still push the boundaries

As is always the case with e-commerce, Amazon may be the one to dictate the new direction. Their latest idea is a self-service shop controlled by many cameras and sensors, with the shopper’s card being billed immediately upon leaving without wasting time on check outs or queues.

 

This kind of self-service could help revolutionise shopping of all kinds, and will most likely start with things that are readily available online but has the potential to grow to things like food. With strong security, this can work as a trustworthy system for business that will offer major changes to the industry, and save huge amounts of time for customers.

 

Terminals will finally be improved

When cards change, the terminals they use will too.

Despite the updates to POS terminals having been minimal ever since their introduction in the 80s, the changes in cards in the contactless age has finally warranted this area of technology to be improved. The terminal website myPOS has made strides in how payment transactions are made, allowing for contactless payments to be performed anywhere using portable terminals and apps. Expect this to catch on.

 

Even more people will adopt it

Despite the new innovations being made, fixing the flaws of the current system are just as important. In the UK, three million businesses have yet to use contactless and consider sticking purely to cash far more cost-effective, likely due to not wanting to spend money on implementing new technology, or fixing issues that cash just doesn’t have like machines not scanning.

 

Limiting payment options, however, is a bad move that can result in you getting far less profit than you potentially could, with businesses accepting contactless earning on average 10% more revenue. Alongside that, there are a lot more positives with contactless, like not needing to count money or worry about it being secure in-store.

 

Indeed, this isn’t a flaw in the function of contactless, but more something that people will become more educated on in the future. It’s important for more businesses to become aware of the benefits of contactless, and this will happen over time.

 

Improvements in Security

One thing that will need to be improved at the same rate as the technology itself is the security to protect it. Preventing fraud is always an essential focus, no matter what the payment option is. Along with the more traditional problems, there is the risk of wireless technology being used to scan your card and steal its assets without you knowing.

 

Having built in fingerprint sensors is a way many companies are countering this risk. Others focus on a large ID database, in which a customer’s payment ID will be temporarily accessed by the company so as to make the transaction more secure.

 

For some, a current flaw in the system is the limit for contactless cards being £30 for a single payment in the UK, though this is certain to increase in the future as both the popularity of contactless payments and the security behind them both increase.

 

The American Market

Despite the size and strength of America’s economy, contactless payments are an area they’re severely lagging behind in. An extremely large portion of shops still deal with only cash, with the others accepting more of a Swipe and Sign system.

 

Though some US companies are looking to expand on this area after seeing how it’s worked out for other countries, some work on America’s payment system will be needed for them to catch up. These requirements would include:

 

  • Reduced stigma on alternative payment methods from consumers
  • Encouragement by credit companies to issue these cards to more applicants.
  • Shop owners to fully catch on

 

Contactless being overtaken?

Though it’s unlikely for the more standard debit card transaction to become obsolete in the near future, the use of it will help pave the way towards the popularity of contactless payments in places it’s yet to fully take off, such as the previous example, America. We should expect Chip and Pin to become the most popular before the landscape shifts to contactless.

Next, we should expect to see mobile payments rising, maybe even above contactless. Then, who knows!

 

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E-Commerce- 7 new trends that won’t die

Whenever new improvements to technology arise, e-commerce will always find a way to benefit from it. According to Statista, e-commerce is estimated to make a total of $4.5 billion from sales in 2021. That says a lot to the kind of profit you could make with the right approach. The right approach, however, is constantly changing, and there are businessmen far and wide struggling to keep up. Here are 8 e-commerce trends we’re expecting to see grow in the near future, so you can implement them now:

 

Subscription services

According to McKinsey, subscription-based e-commerce services have grown more than 100% per year for the last 5 years. If you’re wanting to retain loyal customers, a subscription service can help you build a strong fanbase. Giving people freebies or discounts for buying from you monthly can be the difference between a one-time customer and one who invests in your product for years on end, and that’s why companies worldwide are jumping on it.

Increased personalisation

In an age where a customer’s needs are catered to in a variety of ways, you may fall behind if you’re not doing the same.

Recommended items are an easy way to take a customer’s data and give them a worthwhile experience. It keeps them coming back, and persuades them to buy more, which is a no-brainer for an online store.

 

Chatbots, chatbots everywhere

The tool of AI assisted chats have been around for a while as a way to easily perform tasks simple enough a human isn’t required for it. As 2019 continues, many companies are looking into the benefits of using them for tasks previously needing a human’s input, like checking inventories and answering customer questions, as it saves a lot of money.

As for the biggest example of chatbots in e-commerce, that would be eBay. Their use of it allows customers to become aware of new deals and find what they’re looking for far easier.

 

Note: Whilst AI is expected of the technological age, many customers still prefer to be able to naturally talk to a human when it comes to specific queries on an item before they buy. Not only that, but having a team of only chatbots would be an awful idea. There needs to be a balance, so people don’t lose patience if there’s ever a bug or something else stopping the bots from functioning.

 

Better visualisation

Seeing a product in person and being able to physically feel for quality it are two aspects lost in online stores compared to the more traditional type. It can be highly disappointing to see a product that has a nice image, but has poor functionality or product quality when it comes to finally using it.

Because of this, it should be a goal for anyone working in e-commerce to invest in the idea of 3D imaging and other types of virtual reality to make this drawback a thing of the past. Whilst nowhere near the sort of virtual revolution written in your typical sci-fi story, it is an area of technology that has made strides in recent times, enough to the point of maybe becoming a common way for people to evaluate products without needing to go to a store.

Along with the enlarged 3D images of the products, video descriptions are becoming more popular to allow the customer to get a more in-depth experience.

 

Voice Search

Moving from the eyes to the mouth, the voice search feature is quite a new one that has already grown to the extent that it makes up 20% of all searches at this point. Comscore also estimates it will make up 50% of all searches by next year.

With the growing popularity of phone assistants such as Alexa, more companies are making an effort to improve their voice search system, as demand in the market rises. Voice search is a lot more convenient than typing for a lot of people, so we can guarantee it’ll continue to grow.

 

Instalment payments

Let’s say a customer wants a product from you, but doesn’t have the money at the time. This could be costing you a sale. Instalment payments are getting more popular because of this, with PayPal being a huge innovator in the space.

A lot of companies do seem to lack the trust in customers to do this, and maybe rightly so, but when it works, it really works. For instance, the retail chain Very makes a lot of its profits in the sales of electronics through monthly instalment payments from customers.

 

As for creating a good experience out of this, convenience for the customers is key. They should get automatic updates on a payment before the deadline so they can plan accordingly, as well as the option to pay the remainder all at once if they become capable of doing so.

 

The power of influencers

Nowadays, those of the millennial generation constantly make up a larger percentage of the market each year. In terms of their spending habits, 70% of this group tend to buy products based on peer recommendation according to a survey by Collective Bias. Meanwhile, blogging seems a useful tool as well, with 30% going by the recommendation of a blogger. That is why brands love influencers, and that is why they’ll continue paying them to talk favourably about their brand.

 

While all of these things are already being used by the biggest online stores on the internet, there is good reason. If you’re looking for the next step to bring you closer to the user experience levels of Amazon, these should help.

 

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America Catching On With Contactless

To many, the global superpower that is the United States can seem like the trendsetter that the rest of the world follows. In terms of how they pay for things, however, it is pretty far behind Europe and Asia. A study available here by A.T. Kearney last year showed that only 3% of US cards are contactless, compared to the UK’s 64% and South Korea’s 96%.

 

Why America is lagging behind

The faster alternative to chip and PIN, that only requires tapping it on a checkout terminal for the transaction, haven’t taken over the US mainly due to the size of the market. It is far easier to make changes to a comparatively small country like the UK compared to one of the world’s largest countries that has a far vaster amount of different retail stores and banks. The method of introduction also played a key part in this difference. Almost five years ago, when the UK first introduced contactless cards to the public, it was done through the popular travel option of public transport. Three years later, the number of contactless cards in the UK had already reached 119 million, accounting for 78% of debit cards and 62% of credit cards in use based on UK Finance statistics.

 

By contrast, the US don’t even use a regular credit card for public transport most of the time. In fact, chip and PIN could even be seen as a work in progress in America with how many retailers are just getting used to it, so contactless is clearly not held in high regards over the pond. Despite this, chip and PIN is growing more accepted over time, with retailers who don’t install chip technology to prevent fraud being held accountable as of 2015.

 

This has a silver lining, however, as it’ll make the transition towards the contactless system far easier for America. Most of the new card readers installed after the 2015 changes already have contactless technology built into them, giving Americans the option if they don’t trust it.

Last year, J.P. Morgan expressed desires to provide millions of contactless cards to customers and by the end of this year, Visa hopes the number of contactless cards in the US to have reached 100 million.

 

Whilst that seems like an overly ambitious goal for some, it’s what many banks and card issuers will be striving toward, as A.T. Kearney has already estimated banks could make a $2.4 billion profit from card earnings across the next five years by introducing contactless cards as a widespread system.

Research has also shown most contactless card payments will be used for mundane things such as grocery shopping, fast-food and clinic payments, as many people will want to pay for these generic tasks quickly and conveniently. That’s the way it is here due to our £30 limit on contactless payments to eliminate fraud- and the US may implement a similar policy.

 

Credit Cards in the US

Two years ago, the payments from all types of cards in the US (other than contactless), amounted to $6.6 trillion according to the Federal Reserve. Whilst this may seem like a giant amount, analysts believe it could be far greater if payment options such as contactless became popular in the country’s market.

 

A big bite for Apple

Beyond the banks and card issuers, there’s another party benefiting from the increase of contactless cards coming to America; the tech giant Apple. The payment service ApplePay acts as a contactless payment option for iPhone, Apple Watch, iPad, and Mac, and they’d reap the rewards of a contactless-loving USA.

 

Why Americans are scared of contactless

No option is ever perfect, as many worry about the security of contactless options. Despite evidence from financial experts presenting it as every bit as secure as chip and PIN, the public’s natural scepticism of new ideas have caused many to worry about the safety of this option.

Contrary to this belief, however, contactless cards have far less chance of counterfeit problems due to the chips placed into them, making them an even safer option. On top of this, creating a maximum spend on contactless would stop people from stealing a card and emptying a bank account quickly.

Despite the fear some have of contactless cards in America, they are on the rise now and will only continue to grow. The US has started moving towards the cashless society the rest of the world is nearing, and contactless will be the figurehead of that.

 

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Reasons why your Business NEEDS to make the switch to contactless payment solutions

More than just a saying or statistic, it has become reality that ‘Businesses that decline card payments are losing out’.

Sorry, we don’t take card payments’ should be a thing of the past as Britain quickly converts to a cashless society, not taking card payments should be something rarely heard of by now. Unfortunately, this is not the case just yet. 75% of all UK retail purchases are made by card; and yet still, more than two thirds of British small to medium sized businesses (SMEs) still don’t accept card payments.

With Cheaper PAY’ment solutions you can:

  • Accept Payments over the phone
  • Accept online Payments
  • Accept smart phone payments
  • Accept Chip ‘n’ Pin payments

How will these benefit your business?

  • Never miss a sale – Customers are able to buy your products anywhere at any time with secure online payments which means more sales for your business.
  • Beat your competitors – Customers are more likely to shop at a store that offers card payments.
  • Happier customers – Card payments are processed in a matter of seconds so customers can quickly continue with their day and you can get on with serving the next customer.
  • Lower bank fees – Handling less cash means fewer trips to the bank and more money back into your business.
  • More security – Extra features protect your business from fraudulent transactions and tell you immediately if a customer’s funds have not yet cleared.

Our low transaction costs are what make Cheaper Pay one of the most affordable merchant service suppliers available. Many card machine companies will charge you for a service that is designed to benefit growing businesses rather than hinder them.

At Cheaper Pay, we believe in supporting and innovating businesses with evolving technology. That is why we offer FREE quotes and a 3 months’ free trial to ensure that the payment solution you have chosen is compatible for your business.

To begin your journey to contactless payment get your free quote HERE.

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Pepare for the next generation of card payments

Paying for your shopping using your smartphone just got even easier as Mastercard expands the reach of its mobile payment app.

The humble credit and debit card may be a step closer to extinction thanks to a new announcement from Mastercard.

The company has revealed a major expansion to its Masterpass digital wallet service that will allow customers for the first time.

Going forward, Masterpass should now work seamlessly on your smartphone, wearable device or tablet, letting you pay online, in-store, or using the NFC-enabled app with just one touch.

Masterpass makes paying for goods even easier

Masterpass makes paying for goods using your smartphone even easier

Mastercard says that the new service, which links to your current account, is perfect for a wide ranges of use cases, from paying for the tube in the morning to splitting the bill at lunch and ordering your weekly shop online.

Banks will also be able to build Masterpass into their own apps, bringing together all your various digital payment methods and apps in one place.

The company says that around 80 million people around the world will be able to benefit automatically from the new service, which launches in the US today before expanding to Europe later next year.

The news comes as competition in the mobile payment market continues to increase, as big players such as Apple and Samsung throw their weight behind the technology.

Since its launch in 2014, Apple Pay has helped popularize the idea of paying for good using a mobile phone in the UK, with thousands of businesses across the country supporting the technology.

 


Moore, M. (2016) Home. Available at: http://www.express.co.uk/life-style/science-technology/689626/mastercard-masterpass-contactless-shopping-payment-app-nfc (Accessed: 15 July 2016).

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Selfies And Contactless Rings: New Ways To Pay

The way we pay for goods is changing. Get ready for Selfie Pay, contactless payment rings and iris scanners.

What if you could use a selfie to pay for things? How about the rhythm of your heart?

New technologies that could change the way we buy things have been shown off at the Gherkin as part of London Tech Week.

Selfie Pay takes everyone’s favourite vanity exercise and makes it useful: allowing you to authorise a transaction with your face.

The app requires you to blink so it knows you’re really there and someone isn’t using a photo of you to fraudulently authorise a transaction.

The idea is to get rid of the need for passwords, instead using biometrics: unique data based on individual characteristics like your face, eyes or fingerprint.

“If you think about passwords, they’re a standalone measure,” said Jane Khodos from MasterCard. “They’re easily lost, stolen or forgotten.

“Here you’re authenticating with what you have: your phone and also who you are.”

You could use this kind of tech to buy goods, pay for bus or train fares, or to log into your computer.

We also saw more of Nymi: a wearable wristband that can identify you by the unique rhythm of your heart, found in your electrocardiogram (ECG).

Your heart rhythm is not to be confused with your heartbeat, so the band would still work if you had just run for a bus, for example.

“We’re also very concerned about the security issues, it’s something that’s top of the mind for us,” said Amy Neal from MasterCard Labs, the company’s research and development division.

It is not just biometrics that could change payments.

Kerv is said to be the world’s first contactless payment ring: a simple piece of technology that essentially means you are wearing a contactless payment card.

Payment tech inventors emphasise that there is no need to choose just one of these products.

“You can start to bundle biometric authentication together,” says Ms Neal. “So you might have Selfie Pay, but also the electrocardiagram for additional security.

“We hear stories like people are concerned that they may have an identical twin, so what does that mean if you’re doing selfie pay?

“For us this is ensuring that we have a full suite of biometrics available.”

The Kerv ring is due out in July, Selfie Pay comes out in the UK this year and the Nymi band and iris scanner are both still in development.

 


Team, T.S. (2016) Selfies and Contactless rings: New ways to pay. Available at: http://news.sky.com/story/selfies-and-contactless-rings-new-ways-to-pay-10323052 (Accessed: 15 July 2016).

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London’s contactless Tube payment system is going global

Other cities will soon be able to use TfL technology to develop their own contactless payment systems.

The contactless payment system used on London’s transport network will soon be modified for use in other cities.
A deal between Transport for London (TfL) and transportation firm Cubic will see the latter adapt the contactless ticking system and license it around the world. The deal, worth up to £15 million, will help TfL ensure fares don’t rise for the next four years, the mayor’s office said.

Cubic will be given access to London’s contactless system to allow it to tailor it to other transportation networks. The company first worked with TfL in 2003 to develop the technology behind Oyster and has since helped upgrade the system to support contactless payments from debit cards, Apple Pay and Android Pay.

Outside London, CTS provides similar ticketing technology to Brisbane, Chicago, Sydney and Vancouver. The non-exclusive deal with TfL will allow the company to integrate technology developed for London’s network into other transport systems.
According to TfL, more than 500 million journeys have been made by more than 12 million unique credit and debit cards since the contactless system launched on London’s busses in December 2012. The technology was expanded to cover Tube and rail in September 2014 and has been used by customers from 90 different countries with one in ten contactless transactions in the UK made on TfL’s network.

Cubic continues to run TfL’s ticketing and fare collection services on 8,500 busses, 1,900 Underground and Overground ticket gates and 1,600 ticket machines across the network.

 


Temperton, J. (2016) London’s contactless tube payment system is going global. Available at: http://www.wired.co.uk/article/london-underground-contactless-payments-licensing-deal (Accessed: 15 July 2016).

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Contactless payment coming to Birmingham buses and trams

The way we pay for public transport will become a lot more straight forward.

Catching the bus in the West Midlands is about to get a lot easier.

National Express West Midlands has announced plans to fit their buses with technology to allow contactless payment.

Their 1,500 buses in the area with take payments from bank cards, smartphones, smart watches, cash and Swift cards.

Peter Coates, managing director of National Express West Midlands, said: “We know our customers want the choice of using contactless when they travel.

“Only a month ago, we introduced it on the Midland Metro and already 7% of passengers buying a ticket on board are using contactless.

“So, as part of our pledge to the West Midlands Bus Alliance to get more people travelling by bus, we are investing in contactless because it makes journeys quicker and easier for passengers.”

The new technology will appear first on buses in Coventry by the end of the year before coming to Birmingham and the rest of the West Midlands over the following two years.

It is predicted to speed up bus journeys because passengers will spend less time buying a ticket at bus stops.

A report into the effects of congestion on bus passengers recently said: “If London-style cashless buses with contactless payment and smart ticketing could be extended to the rest of the UK, bus journey times could be improved by up to 10% by halving dwell time at bus stops.

Soon you will be able to pay your bus fare with your debit card.

“In urban conditions, dwell time makes up between 25% and 33% of total journey time. The big five bus operators in the UK have set a target to introduce contactless bus transactions by 2022.

“They should do everything possible to accelerate this, and it is realistic for them to achieve this goal in the large conurbations within three years.”

 


Beardsworth, L. (2016) When will contactless payment be available on Birmingham buses?Available at: http://www.birminghammail.co.uk/news/midlands-news/contactless-payment-coming-birmingham-buses-11609505 (Accessed: 14 July 2016).

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Festival-goers snap up contactless technology as Qpal launches

QPAL, an Aberdeen-based start-up that has created an innovative technology solution for the events industry, officially launched on Saturday with its first successful deployment at a music and ale festival near Edinburgh.

Aiming to enhance event experiences for both organisers and attendees, Qpal is bringing its innovative web application, which enables efficient, smart and cashless payments via contactless technology, to the UK events industry.
Craig Buchan, founder and managing director of Qpal, comments: “The Qpal team is thrilled to officially launch after the first full deployment of our technology at the inaugural Hops in the Garden event, which took place near North Berwick.

“We developed this solution with the core aims of reducing queue times, increasing revenues, and giving event organisers access to real-time data – with the overarching mission of boosting and enriching live events for everyone involved. This is exactly what we achieved at Hops in the Garden, and we are set to do the same at upcoming events across the country.

“We were delighted to work alongside an early adopter of the Qpal technology, who fully embraced what we are trying to bring to the industry, and bought into our vision.”

Ian Stokes, manager of Hops in the Garden, adds: “From initially meeting the Qpal team, we knew this unique solution would be a great fit for our event. As our venue is relatively isolated with no cash machine on-site, Qpal was the perfect solution to ensure our attendees could easily purchase food and drink throughout the festival.”

The Qpal technology allows event attendees to load cash onto a branded card, and use its contactless technology to quickly and easily make payments throughout an event. This eliminates the need for cash or token systems, which are currently used across the events industry, and brings about a whole host of benefits to event organisers and attendees alike.

Ian continues: “We plan to host Hops in the Garden again next year, so the access to the data analytics is invaluable, enabling us to make key decisions based on a better understanding of our customers and their purchasing behaviour.

“We wish Craig and his team all the best for the future, and thank them for helping us to deliver a better event experience.”

In February this year, Qpal was accepted onto the exclusive 12-week Accelerator Programme in Aberdeen, which is run by Elevator UK, a business support organisation and centre of entrepreneurship based in Aberdeen.

 


 

Festival-goers snap up contactless technology as Qpal launches, via: http://www.scotsman.com/news/festival-goers-snap-up-contactless-technology-as-qpal-launches-1-4175705 (Read 13/07/2016)

 

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EU ban on credit card fees backfires – you’ll still pay 2.5pc to spend

Consumers are still having to pay high fees when using credit cards despite new EU regulations that have capped transaction costs.

At the same time, the rules have resulted in millions of cardholders losing popular perks such as cashback.

As of December 2015, the EU ruled that the “interchange fee” – paid in the first instance by the shop – on credit and debit cards could be no more than 0.3pc and 0.2pc repectively.

Up to then the typical fee was 0.8pc, with shops passing on the cost to customers either through higher prices or explicit credit card usage fees.

The intention of the EU’s new rules was to lower this cost and with the hope that consumers would benefit from lower prices and fees.

But many readers have contacted Telegraph Money confused as to why they continue to pay far more than 0.3pc when using a credit card. Airlines such as Ryanair and Easyjet still add a 2pc charge, for example, and some cinemas charge over 5pc –in the form of fixed-sum “card handling fees”.

The regulations make clear that shops and other sellers of services “must not charge consumers, in respect of a given means of payment, fees that exceed the costs borne by the trader for the use of that means.”

In other words, these fees shouldn’t be used to boost retailers’ profits.

But with some firms charging nothing, and others 2pc or more, that is precisely what Your Moneyreaders, among others, believe is happening.

James Daley, managing director of consumer campaign group Fairer Finance, said: “There doesn’t seem to be anyone policing credit card charges. Nobody is stepping up to these companies and asking them why they apply a 3pc surcharge when others process cards transactions for free.”

According to the Department for Innovation and Skills, unfair surcharges are only looked into when there is a complaint. The first point of call is consumers’ local trading standards office.

Complaints are rare, partly because the sums are often small – but also because the companies that levy the charges are quick to justify them.

The industries that charge

Richard Koch, head of policy at trade body, the UK Cards Association, said the worst offenders are airlines, cinemas and travel agents.

When paying for a flight, customers could expect to pay a 2pc credit card charge with Ryanair. EasyJet applies the same 2pc charge plus a £13 “administration fee” which it adds to all bookings. Flybe and Monarch charge 3pc.

Ryanair told Telegraph Money that the charge reflected the cost of processing credit card payments, including bank fees.

Easyjet took the same line. A spokesman said: “The 2pc transaction fee applied to credit card payments covers all costs associated with processing the transaction of which the bank charge is just an element.

“Other associated costs have increased significantly, particularly in relation to card data security.”

Online travel agents apply charges too. Customers who book a trip through Travel Republic could expect a 1.99pc surcharge if paying by credit card and Thomson applies a 1.5pc fee.

Rail firms and cinemas also charge. Everyman Cinema adds 75p to every ticket booked online.

Even the Government charges taxpayers who pay with credit cards – although here at least theses fees appear to be falling.

Until recently, the government charged a 1.5pc fee for those who wanted to pay tax by credit card. As of April 1, it has been reduced to “better reflect the costs associated with different credit cards.”

When asked about the varying costs, an HMRC spokesman said: “We don’t make a penny from credit card charges. We are merely passing on what we are charged for processing a credit card payment.

“We have introduced and published separate rates to better reflect the costs associated with different credit cards.”

A surcharge is not applied when paying for driving licences and passports. However, the DVLA does add a £2.50 fee to vehicle tax payments by credit card which it says cover the costs of processing the payment.

A number of high-profile firms, such as Trailfinders, do not charge customers for using credit cards.

A Trailfinders spokesman said: “Unlike other travel companies, we don’t charge extra for the use of credit cards or unwanted hidden extras, nor do we charge a premium rate telephone number.”

Sainsbury’s and online marketplace Amazon also do not add on a surcharge.

Homeware retailer IKEA dropped its fee in 2010.

Cashback rewards cut

While the rules appear not to have stopped some firms from levying high card fees, they have had another distinctly negative impact. This is the dramatic decline in cashback and other cardholder perks.

Capital One, one of the biggest credit card providers, was the first to cut its cashback scheme.

It withdrew all of its reward cards in April 2015, saying the EU rules meant they were “no longer sustainable.

A month later, RBS and Natwest announced the end of the “YourPoints” scheme which gave customers one point per £1 spend.

War workers queuing for a midnight show at the cinema. circa 1940

A 75p “card handling fee” applied to your cinema ticket may not seem much – but it could be 5pc of your ticket

 

Tesco Bank* was another provider which slashed its rewards scheme. In November, it announced that customers would need to spend £8 outside of Tesco to earn one Clubcard point, instead of £4 previously.

At the time, a Tesco spokesman said: “As a result of changes in the credit card industry taking affect this year, the amount that card companies earn from businesses who accept credit cards is reducing.”

M&S Bank also cut rewards. Customers were told they would earn one point for every £5 spent from February 2016, instead of the usual £2.

Instead of reducing the cashback, some providers increased the annual credit card fee – Santander’s 123 credit card* went from £2 to £3 a month in January.

Santander suggested the EU commission ruling was part of the decision.

It added: “ The European commission ruling on interchange has significantly reduced the fees banks receive.”

European Commission competition spokesman, Yizhou Ren, said it was too early to judge whether costs borne by consumers would fall.

“It is quite possible that these reductions in interchange fees have not yet been passed on to merchants,” she said.

What to do if you think the surcharge is unfair

If you feel like your credit card costs is unjustified, the first thing to do is to complain to the retailer.

If this doesn’t work, you can complain to your local authority’s trading standards officers.

Another option is to try alternative dispute resolution where an independent party will look at your case to try and help you and the retailer to reach an agreement. According to Citizens Advice, most judges will expect you to try this before taking the matter to court.

 


Murray, A. (2016) EU ban on credit card fees backfires – you’ll still pay 2.5pc to spend. Available at: http://www.telegraph.co.uk/personal-banking/credit-cards/eu-ban-on-creditcard-fees-backfires–youll-still-pay25pc-to-spen/ (Accessed: 7 July 2016).

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50 years on: How credit cards changed our relationship with money

Fifty years ago this week Barclaycard issued the first credit cards in the UK.

Half a century on, consumers are used to a range of convenient ways to pay, but back in 1966 there was a feeling of change when people tried to brandish their exciting new plastic cards.

“When it arrived I didn’t really know what it was,” admits Liz Hodgkinson, who was a fresh-faced 22-year-old just out of university.

The company sent out some 1.25 million plastic cards to Barclays customers from 29 June 1966 and while some sent them back or never used them, many, like Liz, a writer, embraced the new way of paying.

“There was an explanatory letter from Barclays which said it was issuing the cards to its best customers. It was a terrific revolution as far as women were concerned as previously you had to have a male guarantor to get credit.”

Liz Hodgkinson in 1966 and today

Liz Hodgkinson in 1966 and today

At the time, the bank said: “[Barclaycard’s] purpose is to reduce the use of cash in shopping and other transactions and the scheme is designed to appeal not only to those who must travel and spend a good deal of money in restaurants, but also to the everyday shopper throughout the country.”

It also stressed the benefits to retailers and businesses by pointing out that the card would help in “reducing or eliminating the book-keeping now needed to maintain customers’ credit accounts.”

‘Made me feel special’

Once she’d worked out its advantages, Liz used her card as soon as possible.

“I realised that I could buy something without having to pay for it there and then and could have three weeks’ grace. It meant I didn’t have to wait until payday.

“It made me feel very special. My husband banked at Lloyds at the time so didn’t get one.”

In fact it took Barclays’ High Street rivals six years to respond.

Then and now

By the time a group comprising Lloyds, NatWest and Midland (now HSBC) launched the now-scrapped Access card in 1972, there were 1.7 million Barclaycard holders.

Today the company says it has 10.5 million consumer customers as well as many more business customers.

Graphic showing key stats of 50 year anniversary

In the intervening period, the world of plastic cards has changed completely.

In 1966 Barclaycard charged an annual interest rate of 1.5% but expected payment by the end of the month.

The idea of revolving credit, where a card can be used to maintain a longer borrowing, only started in 1967 when Barclaycard offered up to three months’ credit. Now, of course, it’s possible to be in debt to a credit card for a lifetime and the average interest charged on outstanding balances is 18.9%.

The borrowing limits in 1966 were much more modest, too. Cardholders were offered up to £100 worth of credit. Now the average is around £4,000, the company says.

Looking ahead, plastic cards will take over from cash to become the UK’s most frequently used payment method by 2021, reckons Payment UK.

The growth will be driven by “the next generation of account holders”, says the UK Cards Association as “younger people are more likely to embrace new technologies such as contactless cards and mobile payments.”

Barclaycard being sold in 1966

Paying on plastic has come a long way since 1966, with the introduction of debit cards and contactless payment

But the older generation is getting in on the act, too. Liz Hodgkinson, now 72, reveals: “I have an app on my phone to make contactless payments,” although she admits: “It was set up by my grandson!”

Debt warnings

While the introduction of plastic in 1966 may have given cardholders like Liz a feeling of confidence, the evolution of the credit card also meant the danger of getting into debt very much became a reality.

“I was elated to get an Access card when I was aged 18,” says Karen Wake, 55, a pension expert. But her happiness didn’t last. “By the age of 25 I had built up £30,000 worth of debt.

“I worked hard to pay it off in five to six years and have had no debt since then,” she says. “Despite the fact I now work in the financial services industry, that didn’t equip me to manage my finances at a young age.”

Today, many people happily use credit cards for convenience – often earning rewards or cashback – while paying the balance off every month to ensure there are no charges.

But overspending and building up long-term debt remain big problems.

Mike O’Connor, chief executive of the debt charity Step Change, says: “The average credit card debt we see is £8,403 and last year we dealt with more than 200,000 people with £1.7bn of credit card debts.”

He says the Financial Conduct Authority should reform the market to ensure that credit cards work better for consumers, especially those in financial difficulty.

“Small changes to existing rules, such as increasing minimum payments from 1% to 2% of the balance or fixing minimum repayments so that they don’t fall as the balance declines, could save people thousands of pound and cut years off repayment periods,” says Mr O’Connor.

 


Read, S. (2016) 50 years on: How credit cards changed our relationship with money. Available at: http://www.bbc.co.uk/news/business-36518248 (Accessed: 5 July 2016).

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UK Debit Cards Surpass 100M Mark

The circulation of debit cards in the U.K. has hit a major milestone.

The U.K. Cards Association announced on Thursday (June 30) that there are more than 100 million debit cards in the U.K.

Growth in debit card circulation has increased 2.7 percent over the past year, surging from 97.6 million to 100.3 million in April of this year.

In a statement from The U.K. Cards Association, the organization’s head of policy, Richard Koch, said:

“Since they were first launched in the U.K. in June 1987, debit cards have become a prime feature in the nation’s wallets. Now, almost 30 years later, more than half of all retail sales in the U.K. are made using a debit card. More recently, it has been the growth of contactless, as well as the increasing use of debit cards for online shopping, that has been driving the changes.”

According to the association, debit card spending in the U.K. reached £37.8 billion earlier this year, showing a 6.8 percent jump from £36.5 billion in 2015.

There are many factors contributing to the rise in debit cards in the U.K. market, including consumers opening new bank accounts and the changing ways in which consumers make payments and access funds.

The U.K. Cards Association’s data found that the number of ATM-only cards has drastically decreased in recent years and the check guarantee-only card scheme ended in 2011.

With the popularity of contactless payments in the U.K., it’s no surprise that 61.8 million debit cards in the region now include contactless technology.

The monthly spending on contactless cards reached a record £1.5 billion in March 2016, according to The U.K. Cards Association. In March, approximately 179.6 million contactless purchases took place, amounting to 67 transactions being made every second.

Earlier this year, Visa Europe released data showing that one in five in-person card transactions are now being made with a contactless card in the region. This translates to nearly 3 billion tap-and-pay transactions in Europe over the course of the last 12 months, tripling levels from a year ago.

 


PYMNTS (2016) UK debit card circulation exceeds 100M. Available at: http://www.pymnts.com/news/international/2016/uk-debit-cards-circulation-milestone/ (Accessed: 4 July 2016).