Thales Blog

Payments - Can One Size Ever Fit All?

November 4, 2014

Although the industry has been making noises for years, mobile payments have so far failed to gain widespread adoption, at least in the developed world. With the arrival of Apple Pay, the debate has now reached fever pitch – could this be the technology that sees the mobile phone replace our plastic payment cards?

In all the back and forth between the different players in the payment ecosystem, it is noteworthy that the majority of the conversation has focused on how to monetise mobile payments, rather than why we are developing these alternative payment methods and where they will apply. Are mobile payments more convenient, lower cost or more secure than the existing ways to pay and do the same benefits apply everywhere?

The elephant in the room, of course, in all of these discussions is that cash and credit cards are not broken. In some cases cash is still king and card payments are on the whole quick and convenient for the end user. Although fraud has risen in the US in recent years, there is general agreement that EMV adoption has significantly reduced fraud elsewhere, at least in physical stores.

For credit cards in particular, one of the key advantages that we often take for granted is their universal applicability. You can use your credit card for payment almost anywhere in the world, whether online, at POS, or for withdrawing cash from an ATM. Travellers can pack a single card and be pretty sure it will work in almost all situations. Will the day ever come when we pack just the phone and leave the cards at home?

One thing is for sure, the diversity of financial transactions is likely to increase – we see evidence of it all around ranging from peer-to-peer money transfers, prepaid, bill to phone and Bitcoin. Given all of this, is it realistic to expect one payment type to fit all scenarios? Perhaps we have to accept that in the future we will use different payments methods for different purposes, rather than striving to develop one payment mechanism for everything.

So rather than debating if and how mobile payments might replace plastic cards perhaps instead we should be discussing which payment methods best fit different transaction environments. For the coffee shop and pharmacy, mobile payments might be a no-brainer but what about the latest flat-screen TV, a meal in Shanghai, a river boat cruise on the Nile or pizza delivery. Then there’s online, in-app, shared device, private device, and even the Internet of Things where your fridge buys milk automatically! The list is endless but the issue is where’s the sweet spot between having a wide range of payment options for different scenarios while minimising consumer confusion and fragmentation. Mobile is part of the answer but it’s not the only piece to the puzzle - the question is how many pieces does the puzzle have?

The one thing that all these transaction types simply need to have in common is that they must be secure – as in any area, new techniques create new security vulnerabilities and potential attack vectors. Theft or mis-use of payment data will very quickly kill emerging payments methods and an ever more diverse array of payment schemes gives the attackers more to chase. Time and time again, strong encryption underpinned by hardware security modules (HSMs) has been shown to be the best means of securing payments. HSMs provide a critical role in establishing trust across the payments industry and are essential for ensuring the highest standards of data protection, complying with regulation and managing cryptographic keys.

See how Thales helps protect and secure mobile payments.