Payment Innovation News

In this issue we continue the theme of innovation in the payments industry brought about by COVID-19 and the solutions designed to reconcile the needs of physical, in-person shopping with social distancing and the resulting decision of many businesses to transition to digital payments. The two worlds can successfully co-exist, as some of the new solutions demonstrate. Canada adopts proven solutions In response to the Canadian public’s concerns about using banknotes and coins during the pandemic, PayPal is rolling out a Quick Response (QR) code payments facility for small businesses taking in-person payments. The new service will allow customers to buy or sell in-person safely and securely without needing to purchase any new equipment. According to PayPal, to make the service even more affordable, it is waiving the standard seller transaction fees on sales using a QR code until 30 September. When making a payment, buyers can go to the PayPal app, click ‘send’ and tap the QR code symbol in the top righthand corner. The camera will open and customers proceed to scan a seller’s QR code and follow the prompts to complete the transaction. A QR solution offered by a prominent payment provider is new to Canada. But it has been extensively employed in many other countries, notably in Asia Pacific, where it serves as a channel to rapidly promote the adoption of cashless payments since no additional equipment is needed by the retailer. In a separate development, Canada’s DC Bank, together with tech company XTM, is installing cash accepting terminals that convert banknotes and coins into Mastercard balances to be used in digital payments, a kind of a ‘reverse ATM’. The same technology (eg. Qiwi Wallet) has been in use for many years in countries such as Russia, Kazakhstan, Ukraine and Romania, where cash paying consumers require a way to participate in the digital economy. While this solution helps to link cash with the new digital world, in Canada, where nearly all of the population (over 99%) has a bank account and a debit or credit card, it will be interesting to see how much demand there is. AI could replace cashiers Sberbank, Russia’s largest commercial bank, the global payment platform VISA and the popular domestic grocery chain ‘Azbuka Vkusa’ have launched a joint project – the country’s first retail store without checkouts or cashiers. The model is analogous to the Amazon Go concept of ‘Just Walk Out’ shopping. Shoppers need to download a mobile phone app called Take&Go and link it to the VISA card that they will use to pay. The service starts when a QR code on the app is scanned at the entrance to the store. An AI-based surveillance system keeps track of the products on the shelves and moves them to the ‘virtual shopping basket’ as the customer takes the products. If the shopper changes their mind and put the product back, it will be instantly removed from the virtual basket. As soon as the customer leaves the shop, the app takes the payment for the chosen items, and the transaction is confirmed by a push notification on the customer’s phone and a receipt sent by e-mail. Sberbank’s management has high hopes that Russians’ uptake of this new way of shopping will happen as quickly as the adoption of cashless payments in a country that in the not so distant past almost entirely relied on cash. In the meantime, the original cashier-less store inventor, Amazon, is piloting a smart shopping cart that allows customers to skip checkout lines in conventional stores. The next generation shopping trolley, dubbed ‘Dash Cart’, is being tested at one of Amazon’s California grocery stores, tracking orders and charging customers to their linked payment card. How US retailers ‘keep the change’ In the past few months, US retailers have been experiencing shortages of coins due to significant disruptions to the supply chain caused by the pandemic (see page X?). Unable to give change to their customers, many retail chains have resorted to crediting the amount due in coins to customer loyalty cards. Not an innovation per se, but a quick response to the arising situation. While some shoppers may resent getting store credit instead of cash, the move is a real boon for merchants. Not only do they get many new customers joining their loyalty programmes and sharing their personal data and shopping preferences with the merchant, but they will, presumably, revisit the retailer in the future to spend their unused change. There is also an added benefit of a reduction in coin handling for the retailers. If the US coin shortage grows, more and more retailers could force shoppers to ‘keep the change’ on their loyalty cards, making the future of US coinage even more uncertain than it already is. Biometrics raise contactless limit Since the beginning of the pandemic, many countries have increased the threshold for contactless payments, allowing for more transaction to be conducted without physical contact with the payment terminal. Yet, the limits are still relatively low due to security concerns. As a result, more and more consumers are using their smartphones in conjunction with payment apps such as Apple Pay and Google Pay instead of paying with contactless bank cards directly. While the fintech companies are benefiting from the growing customer base, the card issuing banks are missing out on receiving full interchange fees. To allow for larger card payments to go through without the need to enter a PIN, banks are starting to implement biometrics on cards. One example is France’s BNP Paribas, which is planning to roll out its first batch of contactless fingerprint cards this autumn. The cards, which use technology from Thales and Mastercard, will initially be distributed to between 10,000 and 15,000 holders of the bank’s Premier or Gold card holders. The built-in biometric reader enables users to make contactless payments above the usual limit by placing a finger on the card at the point-of-sale. In Switzerland, Cornèrcard teamed up with French card manufacturer Gemalto and VISA last year to launch the country's first, limited-edition, biometric Gold card. The technology has also been tested by other banks, including Société Générale, Crédit Agricole, Intesa Sanpaolo and most recently the UK's NatWest bank.