Relatively New Payment Technology Terms Simplified
Have you ever had to sneak in a quick Google search to understand what on earth your colleague was talking about? Coming from a jargon-heavy industry, we get it.
As shopping habits change, so do payment preferences, tools, and (of course) terminology. It can leave business owners feeling like they’re out of the loop. We’re here to make sure you’re up to speed.
Simply put, blockchain is a global ledger—one big decentralized list that records and shares all transactions made with cryptocurrencies like Bitcoin. Because no one person is responsible for the database, Blockchain offers transparency that’s attractive to both business owners and consumers. It helps reduce the potential for fraud and keep both sides of each transaction accountable.
There are already about 3 million active cryptocurrency users worldwide, which means that businesses need to be prepared to accept these payment methods. In a global study of 500 senior financial executives, one in five respondents believed that people will hold most of their financial assets in a blockchain wallet in the next five years.
- Blockchain supports cryptographic currencies like Bitcoin, so customers around the world can make purchases without worrying about the safety and fairness of currency conversions.
- Transaction history is stored via one-way hash function (a way of turning data into binary code), so encrypting information is easy but decrypting it is nearly impossible.
Do you have questions about cryptocurrencies? Get up to speed on all things Bitcoin.
NFC (Near Field Communication)
Odds are you’ve purchased something by tapping your credit or debit card on a payment terminal. That’s because most new cards come equipped with a technology called Near Field Communication (NFC), which allows local devices within four centimetres to exchange data.
NFC’s range of connectivity is far shorter than Bluetooth, which can reach over nine metres. The shorter distance is intentional, making sure you don’t process any payments by accident.
Smartphones can do this too, which is why there’s been so much buzz about Android Pay, Apple Pay, and Samsung Pay. The adoption rate of these wallets has been slow so far—Apple Pay currently has the biggest market share at 75% of all contactless payments—but they’re becoming increasingly mainstream.
- With NFC, it takes a just second to tap, and the frictionless transaction means you do less damage to your hardware than repeated swiping on chip and pin transactions.
- Payments can be processed through NFC a few seconds faster than through EMV chips. Though small, the difference adds up. Both you and your customers will appreciate saving valuable time.
Does your payment terminal accept NFC? If not, you may want to think about making an upgrade.
Some people say technology will make brick-and-mortar stores go obsolete. This may be true in a few specific industries, but not for all. Google found that 75% of shoppers who find helpful local information in search results are more likely to visit the store. The omnichannel business model focuses on giving customers a seamless brand experience—whether they order something online, browse on social media, or visit a physical store.
When it comes to processing payments, omnichannel refers to a business's ability to accept and process various types of payments, and offer a consistent payment experience no matter where a customer wants to complete their purchase. With a centralized payment strategy, businesses can gain a better understanding of how each channel works together, instead of comparing siloed information.
- Consistent branding leads to an increase in customer satisfaction, higher conversion rates, and better customer retention and referral rates.
- Having all of your data in one place means that you can compare your customers’ purchase behaviour across multiple channels instead of having to review separate reports for each payment channel.
Bonus Term: Tokenization (not as new, but still important)
We couldn’t let you go without a refresher on tokenization.
Tokens are a bit like secret codes that keep your digital payments secure. In online credit card transactions, the 16 digits of your credit card number can be tokenized or replaced with a set of random letters and numbers. Beyond credit card data, tokenization can often be extended to encrypting customer profiles, payment information, social security numbers, etc.
In 2016, there were over 1,793 reported data breaches that compromised over 1.4 billion data records. Only 4.2% of these breaches affected encrypted data. This proves that businesses who encrypt personal data like payment info are much safer from fraudsters — and even if their data does get compromised it stays protected, so it’s useless to malicious outsiders.
- Tokenization keeps your accounts and other sensitive information secure even if there’s a leak.
- It also reduces your risk and helps with PCI compliance, as you don’t need to store any sensitive information.
If this sparked your interest, read on about the intricacies of tokenization.
Keeping Up With New Payment Terminology
The world of payments changes fast. To stay competitive, businesses need to be in the know and able to adopt new systems. Most proprietors are too busy running the business to learn the ins and outs of changing payment technology.
Are you a small business owner who wants to stay on top of it all, with little time to spare? Sign up for Bambora’s newsletter for the latest in payments news.
Photo: Stock Rocket / Shutterstock
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