The CHOSEN Blog: June 2015

Tuesday, June 16, 2015

“Cowries, Cash & Credit – The History and Future of Payment Processing” Series 3 of 4

The History (and Future) of Payment Processing – Part 3

For centuries, humans have been inventing, improving and implementing processes for trade and payments. We have come a long way from the days of bartering. In fact, we’ve come a long way in the past 40 years. More and more, individuals are carrying debit and credit cards and forgoing cash. While it is more convenient, there are a lot of risks for both the consumer and the merchants. As we continue advancing payment processes to on-line and mobile options, it’s important to understand the choices and revel in the fact that just five years ago, these opportunities weren’t even a thought.

What is happening in the world of payment processing now? There are three big inventions in which merchants and consumers alike should take note.

Apple Pay

Apple is aiming to replace the wallet with Apple Pay. Apple Pay is Apple's new mobile payments service.

Introduced in October 2014, Apple Pay is designed to allow iPhone 6 and 6 Plus users in the United States to make payments for goods and services with their iPhones, both in stores and within participating apps, using an NFC chip built into the iPhone 6, the iPhone 6 Plus, and the upcoming Apple Watch.

How does it work?

You must set up Apple Pay, by installing iOS 8.1and setting up your Apple Passbook. Once a credit or debit card has been added to your Passbook, Apple Pay is ready to be used in stores and in apps.

In a retail store, when approaching a point-of-sale system compatible with Apple Pay, the screen of the iPhone 6 or 6 Plus will light up and open Passbook automatically, where a user can tap on a credit card to be used or pay with the default card.

A payment is made by holding an iPhone 6 or 6 Plus near a checkout system that includes NFC, most of which look like standard card checkout terminals within stores. A finger registered with Touch ID must be kept on the home button for a short amount of time, after which a payment is authenticated and the transaction is completed. A completed payment is denoted by a slight vibration, a check mark on the screen, and a beep.

To keep transactions secure, Apple uses a method known as "tokenization," preventing actual credit card numbers from being sent over the air. Apple also secures payments using Touch ID in the iPhone 6, iPhone 6 Plus, iPad Air 2, and iPad mini 3.

And don’t forget about the Apple Watch! It uses continual skin contact to ensure payments are secure.

Google Wallet

With Google Wallet, you can forget about carrying plastic cards with you at all times. With a simple swipe on your smartphone, the virtual wallet stores your card information and makes it easier to shop online and in stores.

Launched in 2011, Google's payment solution not only makes shopping more efficient, but also allows you to send money to others, take advantage of loyalty programs and more.

To sign up for Google Wallet, you'll need to have a Google account. If you already have a Google account, you can go ahead and add Google Wallet by using your existing name and password. On wallet.google.com, click “Sign In” in the top right corner.

Then, set up your Google Wallet by entering your personal and billing information, and click “Accept and create.”

Verifying your identity will allow you to access certain features online at wallet.google.com and on the app. These features include activating a free Google Wallet Card with 24/7 fraud monitoring and receiving notifications. Google asks for this information because “financial regulations require that payment providers take steps to verify their customers' identities.”

Your Google Wallet balance is the money stored in your virtual wallet. With this balance, you can send money to others, shop online and make in-store purchases with your Google Wallet Card.

You can add money to your balance from your bank account for free, but to add money from your credit or debit card, there is a flat 2.9% fee.

To use your Google Wallet to make online purchases, just look for the “Buy with Google” button on apps when you checkout. Popular sites that offer this are 1-800 Flowers, Five Guys, Domino's Pizza, Uber, Toys “R” Us and more. You can also buy from Google Play, Drive, YouTube and other Google properties.

Samsung Pay

Samsung rolled out its Apple Pay response when it unveiled its latest Galaxy smartphones. However, Samsung Pay differs in several key ways from both Apple Pay and Google Wallet.

Powered by the technology it acquired when it bought LoopPay in February 2015, Samsung Pay allows for the same near field communication transactions (NFC) as Google Wallet and Apple Pay. However, Samsung Pay also allows Samsung smartphone Galaxy S6 and S6 Edge users to pay for goods and services through the more ubiquitous magnetic strip payment processing terminals. And since such magnetic strip terminals make up nine of every 10 point of sale terminals, Samsung Pay will enjoy a significant advantage in terms of immediate usability over either Apple Pay or Google Wallet.

The rivalry between Apple Pay, Google Wallet and Samsung Pay essentially ends with a consumer's smartphone purchase decision. Certainly one service's features could help tip the scale of whether a given consumer in the U.S. buys an iPhone or a Galaxy S6 or other Android-based smartphone. It's worth briefly noting that Google Wallet does have an iOS app. However, given the overwhelming popularity of Apple and Samsung Pay, we will more than likely being seeing some updates to the Google Wallet product soon.

~~~~~~~~~

Mobile payments are the future, like it or not. So while this budding space continues to take shape, it’s important to keep educated on all services that can be added to the mobile service provider you choose.

The fourth and final part of the “Cowries, Cash & Credit – The History and Future of Payment Processing” series, we take a look at the future of payment processing – CurrentC, Stratos and EMV.

If you have questions about the services Chosen Payments provides or you have a topic you would like to see covered in my blog, feel free to reach out!

Zach Allen Regional Vice President at Chosen Payments
Credit Card Processing | ACH | Gift/ Loyalty Cards | Mobile & Ecommerce Payments | ATM
Toll Free: 1.855.424.6736 x. 116
zach.allen@chosenpayments.com | www.ChosenPayments.com
www.facebook.com/ChosenPayments | Twitter: @ChosenPayments
http://chosenpaymentskc.blogspot.com/

Wednesday, June 10, 2015

“Cowries, Cash & Credit – The History and Future of Payment Processing” Series 2 of 4

The History (and Future) of Payment Processing – Part 2

In our last blog, we looked at the history of money and payments from bartering to Gold and cash. Things changed drastically over a 2000 year time. When cash was introduced, the way humans thought about currency and exchanges changed as well. In part two of our series, “Cowries, Cash & Credit - The History and Future of Payment Processing,” we embrace the idea of cash and are introduced to the piece of plastic that changed the way we all do business.

From Cash to Cards

In 1913, the Federal Reserve System was created in the United States, establishing a central bank and creating gold-backed, federal reserve notes (U.S. dollars). That type of paper currency was used for about 60 years when the U.S. dollar, as we know it, was implemented in 1971. It may be hard to believe, but we didn’t see the cash we use today until the ‘70s. But, what’s even more interesting is the fact that charge cards were actually introduced in the 1920s! Department stores, hotel chains and gas stations started providing these charge to customers with cars so that they didn’t have to travel to their hometown bank.

Remember, the nature of payments has always been transactional.

However, this transactional nature of payments has always featured a few constants. For example, ever since 1946, when Brooklyn-based banker John Biggins introduced the ‘Charg-It’ credit card, the payment transaction has always featured some sort of authentication process that allowed merchants to verify the identity and financial viability of consumers. In those early days, this was a manual, administrative process that sometimes took weeks.

Even in 1950, when the wonderful world of credit cards came to us, the authentication process was a tedious one for merchants. But we continued to move forward with new ideas in the payment realm. If you don’t know what the first credit card was to make an appearance in the U.S., you’re not alone. The Diner’s Club card was made of cardboard and it could be used in only 20 restaurants in the New York City area. Now you know the answer to that trivia question, if asked.

After going off the gold standard in 1971, the U.S. then adopted the current US dollar. (After paying for the Vietnam War, and expanding social programs, inflation was on the rise and the gold standard became severely outdated).

In the payment processing world, ‘outdated’ is unacceptable. We continue to move forward to help make consumerism easier and more convenient for merchants and customers. For example, we saw the introduction of on-line shopping in the mid-1990s and the first mobile payments in 1997.

Can you imagine, today, not being able to pay for something on-line with plastic?

~~~~~~~~~

We’ve reached the 21st century in our look at the history of payment processing. In just the past decade, many innovations have taken place to simplify payment options. In part 3 of the “Cowries, Cash & Credit – The History and Future of Payment Processing” series, we take a look at innovations happening right now – Apple Pay, Google Wallet, Samsung Play and what to expect.

If you have questions about the services we provide or you have a topic you would like to see covered in my blog, feel free to reach out!

Tuesday, June 2, 2015

“Cowries, Cash & Credit – The History and Future of Payment Processing” Series 1 of 4

The History (and Future) of Payment Processing

Examine the history of payments with a focus on how we pay for the things we buy, and two things stand out. First, when it comes to paying for things we buy, we clearly prefer convenience over everything else. The driver behind the evolution of new payment methods- at least over the last century- has been the desire not to be bound by the need to carry cash with us. Second, despite a convenience-driven evolutionary path that has carried mankind from the bartering system of our ancestors through early coin currencies to paper money to checking accounts, and from there, to credit and debit cards, and on through to today’s e-wallets, the nature of payments has always been transactional. At Chosen Payments we appreciate the history of payment methods, but we are here to help you navigate the future of payment processing.

In the digital age, we now have the convenience of virtual payments and many mobile payment options that allow us the freedom to pay for goods almost anywhere. In a four-part series, “Cowries, Cash & Credit – The History and Future of Payment Processing,” we will examine how we got to this point.

From Bartering to Gold and Cash

Many, many years ago, humans engaged in a bartering process. This is when two parties entered into an agreement to exchange resources and services for the benefit of both parties. While bartering worked at the time, we moved on to a more progressive form of payment around 9000 BC – livestock.

Animals are considered the oldest form of currency, with livestock such as camels, sheep and cows being the most commonly used. Some countries used grain as currency and in 1200 BC, China was the first to use shells as currency. Societies off the coast of the Pacific and Indian Oceans embraced cowrie shells as the premiere form of legal tender.

Fast forward to 700 BC and we are introduced to precious metal coins. Gold and silver coins were first used in Lydia (modern-day Turkey) and coastal Greek cities. The profiles of Gods and emperors are stamped into the medal. But we continued to develop.

Leather money came about in 120 BC and is documented as the first type of banknote. But, we moved to paper currency in 806. Paper banknotes first appeared in China at that time, but did not become widely accepted for more than 150 years later. It took centuries for the country to figure out the balance of production and inflation.

And then we strike gold – in 1812. Though it certainly was not the first time gold was part of a payment system, it officially became the standard of value in England. After centuries of banknote use, Europe moved forward with a non-inflationary production of banknotes on the bank standard. The United States adopted the practice with the Gold Standard Act in 1900.

~~~~~~~~~

The path to current payment processing still has many curves and changes of course. Look for part 2 of the “Cowries, Cash & Credit – The History and Future of Payment Processing” series – From Cash to Cards.

If you have questions about the services we provide or you have a topic you would like to see covered in my blog, feel free to reach out!