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Ten more years of technology

By davebirch posted May 15 2007 at 8:21 AM

[Dave Birch] I was asked to write something about the next ten years of technology in retail e-payments, so I thought it might be a good idea to begin by looking at how things have changed over the last decade.  Thinking about, the answer is not much.  All of the technologies that the payment card industry are focusing on today were already in use ten years ago (with one exception, and that is NFC).  Ten years ago, we (the payment card industry) had already started to plan for EMV migration, which it has to be said went remarkably smoothly in the first country to move, the UK.  Ten years ago there was a biometric ATM installed (in Swindon, my home town and the payment city of tomorrow).  Ten years ago we had already started using credit cards on the Internet.  Ten years ago we were already talking about mobile payments and the strength of the customer proposition around the GSM handset: many people thought that would be the next big thing, remember?  Well, the EMV roll out is continuing and in many countries the members are now moving their plans on to the next phase of smart card evolution, the development of chip-based value-added services for customers and for merchants. We might have liked to see things move faster with respect to chip migration, but on the whole it is proceeding well.  By comparison, I think payment cards have performed poorly with respect to the Internet. Back in 1997, cards supported almost all e-commerce.  Next year, they will account for less than half of all online purchases (despite increasing their share of total consumer spend).  The false start with Secure Electronic Transactions (SET) and the slow take-up of 3D Secure have led us to the point where, in the UK at least, CNP fraud is now as big as total card fraud was when we began the EMV journey.  Clearly this is going to change, and change soon.

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It seems to me that both the post-EMV evolution of the business at point-of-sale (POS) and realistic mass-market solutions to both the general problem of online security and the specific issue of CNP fraud are linked to the most important (on a global scale) technology platform for consumer services: the mobile phone.  In the UK, mobile web access is now   almost a fifth of PC web access: 5.7 million people in the UK use the mobile web, as opposed to 30 million who access the web by PC.  (The comparable statistic in the US is 30 million out 176 million, or about 17%).  It looks as if the US mobile lag is shrinking.  So not only do most people have phones, more and more people are happy using them to access data services.

The customer proposition around mobile phones and payments has always been strong, but the technology has not fulfilled its promise, at least in developed countries.  But there is now an "X factor" in payment technology: contactless.  We all understand the proposition around contactless: speed and convenience.  We all understand the proposition around mobile: ubiquity and connectivity.  Put the two things together, in the form of near-field communication (NFC) handsets, and you have something special.  These factors mean that new technology will have a much bigger impact on the card business over the next ten years than it did over the last ten.  Over the coming decade, the mobile phone will shift from being a network end-point to being a pivot between local and global environments, an indispensable and personal security token that bridges physical and virtual commerce.

These opinions are my own (I think) and presented solely in my capacity as an interested member of the general public [posted with ecto]

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