All the 12 Payment Enabling

Technologies & 54

Illustrative Companies

White Paper written by:

Let’s T@lk Payment$ and Knowledgefaber

April 2014

Table of Content

Payments enabling technologies Page

i. Near field Communication 1

ii. QR and Bar Code 2

iii. Bluetooth Low Energy 3

iv. Mobile Card Reader 4

v. Email/Chat/ Phone 5

vi. Biometric 6

vii. Radio frequency identification (RFID) 7

viii. Sound Wave 8

ix. Magstripe Emulation 9

x. SMS/USSD, Mobile internet 10

xi. HotKnot 11

xii. Dynamic Magnetic Stripe 12

Near Field Communication

Near Field Communication (NFC): NFC is in its most common avatar is a Tap & Pay solution that can be used for retail

offline payments, transit, entertainment and numerous other touch points. Any unattended payment situation such

as a parking lot presents huge opportunity. For e.g., clipper card or any cashless cards being used today for public

transport can be integrated into the ubiquitous phones itself thereby making the public transport payments easier

How it Works

Uses radio communication to establish a

connection between two devices in close proximity.

Use Case

Payments, file sharing, transit, ticketing, mobile

top up, advertising

Strengths

Easy to use (tap and go)

Weaknesses

Limited acceptance to date; too many stakeholders;

requires investment in NFC-enabled terminals

Security Risks

Electronic eavesdropping, data modification

Companies involved

1

QR & Bar Codes

A Quick Response (QR) code is a 2d readable bar-code designed originally by DENSO Corp. in 1994 for Japanese auto-

makers to track parts. With smart phones, and QR codes, customers can stores their banking account information on

their phones, go into a store pick out an item, and instantly scan its barcode and check out.

How it Works

Two-dimensional optical label contains data that

can be read by any imaging device

Use Case

Payments, advertising, loyalty, tracking, ticketing,

top up

Strengths

No special hardware required; can be used with any

smartphone; Cheap and easy to create

Weaknesses

Lack of familiarity among users; camera phone and

specific reader software required

Security Risks

Malicious codes

2

Companies involved

Bluetooth Low Energy (BLE)

BLE (e.g., iBeacons): Bluetooth low energy (BLE or ‘Bluetooth smart’) is a wireless computer network technology

which allows connected devices to communicate with each other while keeping the energy consumption by the

devices at a very low level.

How it Works

Uses radio frequencies to passively connect BLE-

enabled devices to beacons

Use Case

Payments, geolocation, shopping, transit, events

Strengths

Low power requirements, low cost, most mobile phones,

tablets, and computers are compatible

Weaknesses

Possibility of information overload to customers

Security Risks

Susceptible to eavesdropping attacks, but frequency

hopping reduces exposure

3

Companies involved

Mobile Card Readers

These include Mobile card readers, Chip and Pin card readers that insert into the audio jack of the phone

How it Works

Dongles plugged into a mobile device allow swiping

of traditional mag-stripe cards.

Use Case

Retail Payment Acceptance

Strengths

Portability, ease of use, low cost

Weaknesses

Varying degrees of security (and consumer trust); lack

of durability; Merchant reluctance (particularly micro)

Security Risks

Can be modified to siphon card data, but hardware can

be modified

4

Companies involved

You can transfer money through email (Dwolla, Paypal, Google), through Chat (Wechat from Tencent), and phone

(Dwolla, others)

How it Works

Users can send P2P payments with linked debit

accounts. Funds are typically transferred using ACH

network.

Use Case

P2P funds transfer; bill payment

Strengths

Speed of transaction, ease of use; no new account

(i.e. PayPal); Little to no cost to users (if used with

bank account)

Weaknesses

Security is low

Security Risks

Apps have few security features (i.e. Square Cash has

no passcode), but data transmissions are encrypted

Email/Chat/Phone

5

Companies involved

Biometric

How it Works

Consumer’s accounts linked with biometric information

which is used as part of two factor authentication to

complete a txn

Use Case

Transaction authentication, passwords, etc

Strengths

High level of security; no money or cards are needed

to complete a transaction; Encrypted biometric

database

Weaknesses

Requires users to setup a profile preemptively

Security Risks

“Mimicry” attacks; brute-force attacks

6

Biometric identification basically means identifying the individual through certain physiological & behavioral aspects

of the individual. Involves use of different scanners designed to store specific biological traits of the person.

Behavioral traits can also be recorded in terms of signatures and vocal characteristics

Companies involved

Radio frequency identification (RFID) is the wireless non contact use of radio frequency electromagnetic fields to

transfer data, for automatically identifying and tracking tags attached to objects. The tags contain electronically

stored information. According to research and markets, the global RFID market is expected to generate revenues

worth $3,925 Mn in 2016, increasing at a CAGR of 29.3%, from a value of $1,087 Mn in 2011.

How it Works

RFID is the basis for NFC - Uses radio

communication to establish connection between

two devices in close proximity.

Use Case

Payments, transit, tolls, vending machines and

tracking

Strengths

Easy to use

Weaknesses

Only permits one way communication between

devices; typically can only be used for low value

transactions

Security Risks

Eavesdropping; data modification

Radio frequency identification (RFID)

7

Companies involved

Sound Wave

These are payment systems that use sound waves to connect smartphones with another device. Secure payments are

made over the cloud with the help of sound based technology and data is exchanged through smartphones’

microphones/speakers

How it Works

White noise (transaction specific and valid for a few

minutes) generated by a Smartphone carries digital

information

Use Case

Vending machines, mobile top up, phone-to-phone

information transfer

Strengths

No personal or account data is stored in the sound

transmission

Weaknesses

Will likely support only small value payments

Security Risks

Stolen phone is the primary risk, offset by the fact

that these are small ticket transactions

8

Companies involved

How it Works

A key fob generates a magnetic field that can be

ready by an existing POS terminal

Use Case

Payments, transit

Strengths

Merchants do not need to upgrade hardware

Weaknesses

Cannot be used with certain POS devices; can be

cumbersome to use; EMV makes the solution clunky

Security Risks

4 digit pin card numbers can be skimmed

Magstripe Emulation

A patent-pending technology, MST is similar in nature to that used in inductive charging. The technology basically

involves transmission of mag-stripe data stored on the mobile device to the magnetic stripe reader at the POS terminal.

The device’s transmitter is used to send the mag-stripe data over-the-air to emulate just a normal card swipe

9

Companies involved

SMS/USSD, Mobile internet

How it Works

User sends a payment request via text message and

the charge is added to user's mobile phone bill or

online wallet

Use Case

Payments, funds transfer, bill pay, top up

Strengths

Easy to use & cheap; user doesn't have to enter

bank/card info; no personal/account data is transferred

Weaknesses

Functionality is limited due to technology

Security Risks

Limited security risk

10

A patent-pending technology, MST is similar in nature to that used in inductive charging. The technology basically

involves transmission of mag-stripe data stored on the mobile device to the magnetic stripe reader at the POS terminal.

The device’s transmitter is used to send the mag-stripe data over-the-air to emulate just a normal card swipe

Companies involved

11

HotKnot

A near field communication technology, it was announced by MediaTek in December last year. The technology uses the

projected capacitive touch panels of devices and does not require the embedded NFC chip or the antenna to work.

How it Works

The technology involves data transmission between

devices through signal transmission between the touch

panels which get coupled. It uses low transmission

power but the data transmission rate is far lower than

NFC technology

Strengths

Transmission rate is far lower than NFC

technology

Weaknesses

Security is low

Security Risks

Susceptible to attacks through pairing

Use Case

Payments, funds transfer

Companies involved

How it Works

The device comes with companion android and iOS app

used by the end user to store multiple card data either

by taking pictures of cards or by using headphone jack

dongle. The swapping of card info can be done using

BLE or other pairing options

Weaknesses

May not be compatible with EMV chip enabled cards

Security Risks

Currently such devices do not provide a security for

accessing it

Use Case

Payments, funds transfer

Companies involved

Dynamic Magnetic Stripe

Strengths

Devices are capable of storing different types of card

data: gift cards, ATM cards, credit cards.No need of

carrying multiple cards and also does not require the use

of cellphone for payment.

The technology can be found in form of a device. Such devices have been developed by firms like the hardware startup

“Coin” as well as Omne. Such devices are capable of acting as a standard credit card but capable of acting as an

integrated form of multiple credit cards

12

Authors:

Let’s T@lk Payment$

Lets Talk Payments is a global initiative which is focused on US, Europe and Asia for

covering innovations in payments. It is being build to become a complete resource

(online digital news, analysis, events, payment product/feature reviews, surveys,

interviews and videos) for the payments industry. The company is based out of

Charlotte (USA) with teams and contributors across the globe.

Knowledgefaber

Knowledgefaber is a fact based research and consulting firm focusing on emerging

opportunities in emerging economies