Pave the way, wave to pay

Rapid change in consumer lifestyle and the significant growth in contactless payments over the last decade has resulted in mobile payments gaining momentum owing to its value proposition for customers, merchants as well as banks. According to a report on new m-payments forecast by research firm Ovum, the total global user base for mobile payment will reach 4.77 billion by 2019 from the existing user base of 690 million in 2014.

While at a holistic level mobile payments are expected to grow, proximity based payments are the fastest growing segment for mobile payments.  The total transaction value of mobile proximity payments (both NFC and non-NFC) will grow from $4.77 billion in 2014 to $141.21 billion in 2019.

The reason why proximity payments are gaining interest is the ease of making such payments and reduction in manual errors due to manual steps involved. Some of the recent deployments have shown that they can offer a transaction experience without even having to swipe a card or remember an account or PIN number, in a time span of mere seconds. Payments can be done using one of the technologies enabling contactless payments just by waving a smartphone at a contactless enabled PoS terminal.

Mobile proximity apps can be either card based or account based. Most of the deployment currently in the globe are card based, however account based mobile proximity payments are also catching up due to their lower transaction costs. In both cases, users upload their card/account data into mobile payment app on their smartphone and then use it to make purchases in brick-and-mortar retail stores. These card/account details are encrypted within the phone and can be used with one-time authorisation tokens for each individual purchase.

There are multiple types of proximity payments that exist in the market today like sound, Tone, NFC, RFID, UHF & Location based payments. However, NFC (Near Field Communication) and MST (Magnetic Secure Transmission) are two leading technologies in driving the mobile proximity payments. They are quite similar in nature if you take a deep dive. NFC and MST are also both contactless payment solutions that don’t require the mobile device to physically interact with a merchant’s terminal. All you need is physical proximity and the customer’s approval to authorise a transaction.

NFC enables contactless communication between two compatible devices, when brought closer. Some of the NFC devices are tags, tattoos, small transmitters, mobile, wearables, USBs, keys, business cards etc. As per Ovum’s reports, by 2019 there will be a total of 1.09 billion global mobile proximity payment users, of which 939.10 million will be NFC.

The popularity of NFC has increased so much that it is being enabled on mobile for ATM cash withdrawal wherein a customer can initiate an ATM transaction by signing into their mobile wallet features and tap at NFC enabled ATM.

Moreover, NFC is being deployed in access control and in health care for functions like patient monitoring etc. besides payment use cases. It is also being deployed in automotive environment for functions like unlocking car doors and enabling keyless entry in the cars.

NFC Forum, a key industry and standardisation body, has launched a certification programme in September 2017, which assures performance and interoperability of NFC components to ensure “consistent, compelling, and connected user experiences.”

Magnetic Secure Transmission (MST) is a technology, used in smartphones, that emits a magnetic signal that mimics the magnetic strip on a traditional payment card and sends it to the payment terminal's card reader for accepting payments. With this proposition, merchants may accept mobile payments without purchasing new POS technology. MST works at about 90 per cent of the card readers out there.

Smartphone players are already integrating this technology in their proprietary payment apps. Soon more key players will join the movement by adapting or developing alternatives to the existing MST technology in the market.  The best thing is MST doesn’t require existing PoS machines to be upgraded, it can be integrated into the apps of any existing payment service and used at existing PoS machines.

Indian market has huge potential for mobile payments with popular technology like UPI, NFC, QR Codes etc. set in motion already. While MST based terminals are still in majority, the recent focus on digitisation of payments has ensured a good penetration of mobile based solutions along with growth in NFC acceptance infrastructure.

Roughly 20 per cent of the PoS terminals in the country may now be contactless (NFC) enabled and the popularity of EMV compliant tap & pay contactless solutions especially like National Common Mobility Card (NCMC), OEM-pay (Samsung Pay, Apple Pay etc.) are further going to drive the usage of NFC based payments.

NPCI is working extensively on developing NCMC use cases for mass transit and smart city initiatives through its proximity based payment solution for all form factors including card (NFC) and mobile (HCE/UPI).

 (The writer is vice president, RuPay Contactless & Smart Cities, NPCI)