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How IoT has Enabled Contactless Payments?

Banking CIO Outlook | Tuesday, June 15, 2021

Tokenization has been used widely by many multinational card schemes to incorporate non-card payments. Near Field Communication (NFC), which replaces a Primary Account Number, is one of the most commonly used methods of credit card tokenization today (PAN).

Fremont, CA: The development of IoT technology has allowed new payment methods to emerge. If we believe that the consumer will authorize payments for their IoT products, there are three payment types that can be materialized.

Card Tokenization

Tokenization has been used widely by many multinational card schemes to incorporate non-card payments. Near Field Communication (NFC), which replaces a Primary Account Number, is one of the most commonly used methods of credit card tokenization today (PAN). Furthermore, the card program on a smartphone or in the cloud produces a specific card authentication value for each transaction. This card tokenization can be used to convert an IoT device into a payment-enabled device. For example, a tokenized payment card can be linked to a car and used to pay for all car-related services such as parking, petrol, and toll payments.

Quick Credit Transfer

Customers can use instant credit transfers to send and receive money in real-time from one location to another through encrypted communication. This means that a consumer in one part of the world can transfer money to someone in another part of the world in real-time. Integrating Instant Payments with open APIs will open up a slew of new creative possibilities, in addition to IoT payment configurations that are already possible with card tokenization.

Digital Currencies

Because of its support for the IoT environment, distributed ledger technology is one of the most talked-about IoT payment methods today. Since ledgers are distributed, IoT devices can transact directly without relying on a third party. Though it is unclear how digital currency projects can be implemented practically at the regulatory level, a controlled framework for digital currency payments can open up a world of possibilities.

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