Payments

<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/05/Artboard-1-copy-8-10.webp" alt="M2P Fintech" title="" width="100%" height="284">Entering card details every time you shop online can be such a tiresome experience. It often plays damp squib, dulling out the thrill of impulsive shopping. In fact, consumers cite this tedious process as one of the primary reasons for cart abandonment.<h2 class="heading-node" id="5e9f">COFT, the savior</h2>This is where ‘Card on File Transaction’ (COFT) emerges as a savior for both consumers and businesses. This functionality pops up on the customer screen, requesting explicit permission to save card details for subsequent payments.As the need to re-enter card detail is eliminated, COFT enables a seamless and convenient checkout process with lesser cart abandonments. It also boosts the chances of recurring impulse purchases.So, the next time you shop for your favorite shoe or that gourmet chocolate bar, you need not enter your card information. Instead, you only need to enter the CVV (the three digits in the magnetic strip) to pay for your purchase.Sounds amazing, isn’t it?We’re sure you can’t wait to understand the techno-functionality behind this incredible system.Here you go!First things first. We’ll cover what COFT actually is. And then, let’s delve into the latest RBI guideline and the mandate’s impact on the ecosystem players.<h2 class="heading-node" id="a695">What are Card On File Transactions?</h2>Card on File transactions are the stored card credentials available with a merchant, payment gateway or aggregator, or digital wallet. Used for future transactions, the card on file will store relevant details in encrypted format except for the CVV number. However, explicit consent from customers is necessary to store card details.The Card on File functionality is a two-stage process.<h3 class="heading-node" id="03af">First Stage</h3>Here the card details are entered for the first time on the website. After authorizing the transactions with two-factor authentication, the cardholder will be presented with an option to save card details for future purchases. If the cardholder opts in, the card details (except CVV) will be saved in an encrypted format.<h3 class="heading-node" id="18f1">Second Stage</h3>In this stage, the cardholder will just enter their card CVV number every time they initiate a transaction. There is no need to re-enter card details.<h2 class="heading-node" id="010c">How RBI’s latest mandate applies to Card on File Transactions?</h2>Reserve Bank of India’s latest mandate has extended the scope of <a class="link" href="https://m2pfintech.com/blog/how-does-payment-tokenization-work/">tokenization</a> to COF transactions. The circular released in January 2019 and August 2021 carried a device-based tokenization framework, and the same has been now extended to COF transactions as well.Meaning card issuers can also offer card tokenization services as Token Service Providers (TSPs), but they will require explicit consent from customers, including Additional Factor of Authentication (AFA). They will also have the control of tokenization and de-tokenization of the card data.Furthermore, the scope of tokenization has been extended to consumer devices such as laptops, desktops, wearables, Internet of Things (IoT) devices. The circular was issued to reinforce the safety and security of card transactions whilst not disrupting convenience.<h2 class="heading-node" id="a412">What is the impact of these latest guidelines on the ecosystem players?</h2>Subscription payments will be impacted as the new guideline requires explicit customer consent even five days before the recurring transaction. There is also a high chance that the customer may end up missing payment notifications and might miss or default on the payment. This guideline implementation must have been completed before 30th September 2021 by Banks.All merchants, banks, payment aggregators, <a class="link" href="https://m2pfintech.com/blog/what-is-a-payment-gateway-and-payment-switch-understanding-the-basics-of-payments-architecture/">payment gateways,</a> and NBFCs must make technical and protocol changes to their current recurring payment functionalities and Card on File data. This structural change will include a significant cost to the players as they must effect a strategic and operational change.With these new guidelines, the merchants will have to rely on the acquiring banks to address the concerns of customer complaints, chargebacks, and so on. Customers may choose to opt for different payment methods if they fail to experience a seamless shopping experience while initiating card transactions.<h2 class="heading-node" id="1529">Tokenization, the security booster</h2>With the introduction of these guidelines, the only remedy available to enhance security is tokenization. It can be used for one-time and recurring payments, thereby freeing merchants from the hassle of storing sensitive data.<h3 class="heading-node" id="e491">So, how does tokenization work?</h3>Tokenization replaces debit or credit card details with a unique set of characters or tokens that will process transactions without exposing the cardholder’s sensitive account details.Here is how tokenization happens.<ul class="list-node" id="decqr9ga3"><li>A credit/debit card is swiped at POS or on an e-commerce website</li><li>The card number will then be transferred to the tokenization protocol</li><li>The system will generate a random alphanumeric string, also known as “Token ”, to mask the original card number</li><li>The token will be routed to the merchant for further processing</li></ul>For example, card-carrying numbers 4781 2345 1235 3391 will be replaced as A2C0 9JUI 8S2F 7GKY when initiating a transaction.The safe and secured digital transaction is now possible with Tokenization!&nbsp;<a class="link au nl" href="https://m2pfintech.com/blog/how-does-payment-tokenization-work/" rel="noopener">Explore more.</a><h2 class="heading-node" id="cbcb">Conclusion</h2>Tokenization will protect card data from hackers as it is extremely hard to reverse the token to access the original card data.Now, there is a paramount need to develop and deploy solutions that satisfy both the cardholder and still be in check with RBI guidelines.<a class="link" href="https://m2pfintech.com/newsletter/">Subscribe</a>&nbsp;to our newsletter and get the latest fintech news, views, and insights, directly to your inbox. Follow us on&nbsp;<a class="link" href="https://www.linkedin.com/company/m2pfintech/mycompany/">LinkedIn</a>&nbsp;and&nbsp;<a class="link" href="https://twitter.com/m2pfintech">Twitter</a>&nbsp;for insightful fintech tales curated for curious minds like you.

RBI Guidelines on Card on File Transactions

<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/04/banner-1.webp" alt="M2P Fintech" title="" width="100%" height="383">Sara usually travels around the globe for her official trips quite frequently, and she enjoys shopping at local shops to bring back memorabilia for colleagues and family. Nairobi was on her frequent travel list, and she loves to shop the local markets for their rich handicrafts. The popular currency formats in Nairobi were either M-Pesa or Nairobi Shillings.However, carrying local currency is not a good idea, and M-Pesa requires a local account and sim card for starters. At the same time, using international debit or credit cards will attract too many charges.That’s when Forex Cards came to the rescue.With single or multiple currencies in one card that has safety and comfort as it is a core feature, forex cards were the best solution Sara could ask for, making her travel much easier.<h2 class="heading-node" id="60d6">So, what is a Forex card?</h2>A forex card can hold single or multiple currencies in a single card, prepaid by nature. It is a globally accepted prepaid card with features of ATM withdrawal, just like a debit/credit card. Therefore, it is a safer and fool-proof way of managing finances abroad, be it for professional or personal travel.<h2 class="heading-node" id="fd11">Types of Forex cards</h2>Forex cards come in various types, and they can be chosen as per the traveler’s requirement. The forex cards are typically differentiated as:<h3 class="heading-node" id="537f">Single-Currency Forex card</h3>This card holds a single international currency and is usually available when travelers only intend to visit one country. Furthermore, if the traveler tries to transact in any other currency other than the preloaded currency, they will end up paying high conversion charges along with markup fees and additional applicable charges.<h3 class="heading-node" id="06ae">Multi-Currency Forex card</h3>Best suited for globetrotters, this type of prepaid forex card allows the user to carry multiple international currencies in one card.<h3 class="heading-node" id="b841">Student Forex card</h3>This type of forex card is specifically designed for the new adults embarking on their maiden financial journey on account of their studies. It also doubles up as an identity card known as International Student Identity Cards (ISIC cards). Student forex cards also offer student discounts and can help primarily help in managing living expenses abroad.<h2 class="heading-node" id="7423">How does a Forex card work?</h2>Like a debit/credit card application, the traveler needs to apply for a forex card with the bank or forex service provider. Once the application goes through, the applicant can load their desired currency of GBP, USD, SGD, EUR, and others in the card.Also, certain documents need to be submitted when applying for forex cards:<ul class="list-node" id="1689ax4q6"><li>Forex card application</li><li>Self-attested copies of Visa and Passport</li><li>Copy of confirmed air tickets of the visiting countries</li><li>The usual attachments of Identity and Address proof</li></ul>If the traveler is a student, they need to submit some additional documents like:<ul class="list-node" id="7zz3nxzh8"><li>Admission letter</li><li>University Identity card or</li><li>Letter of appointment</li></ul>Post these documents verification, the forex card gets approved, and it will be either shipped to the applicant’s address, or they can pick the card up from their choice of branch.The traveler can load the card as per their choice of currency by issuing a standing instruction to the service provider. They can specify the international currencies they want along with the amount in each of the currencies. If the currency conversion happens via a bank, their bank account will be automatically debited, and their multi-currency card will be loaded.If it is a forex service provider, the traveler can load the card using the issuer’s <a class="link" href="https://m2pfintech.com/blog/what-is-a-payment-gateway-and-payment-switch-understanding-the-basics-of-payments-architecture/">payment gateway.</a> Then, they can make the payment by using the standard options of debit card, credit card, net banking, etc.At the same time, forex cards also carry a certain number of charges that may differ depending upon the issuer. Some of the common charges are cash withdrawal, balance inquiry, SMS alerts, cross-currency mark-up charges, etc.Even though forex cards come with their share of charges, they still reign supreme over other payment methods like debit cards, credit cards, or travelers cheques. And the popular opinion claims that forex cards are a much better option when compared against these instruments.<h2 class="heading-node" id="bcc0">Advantages of Forex cards over Debit/Credit cards</h2><h3 class="heading-node" id="97c7">ATM withdrawal fee</h3>Forex cards have set ATM withdrawal fee that is usually lower than credit/debit cards, and they are now accompanied by conversion fee as well.Debit/Credit cards come with a withdrawal fee plus a markup fee of 1% to 3% and currency conversion charges. While it may differ between card issuers, the charges remain significantly higher than using a forex card.<h3 class="heading-node" id="9eda">Transaction charges</h3>Swiping prepaid forex cards doesn’t levy extra transaction charges as the local currency is used for the transaction.Swiping a debit/credit card will attract extra charges as the foreign currency will be converted to the local currency and then will be charged to the traveler’s account. Furthermore, it will attract a markup fee along with other applicable tax charges.<h3 class="heading-node" id="745d">Exchange Rates</h3>In forex cards, exchange rates are well locked in advance, which protects the traveler from fluctuations in the exchange rate.There is no exchange rate lock, and the value of the rupee often fluctuates against most of the international currencies in debit or credit cards.<h3 class="heading-node" id="4562">Temptation</h3>Forex cards curbs the temptation to overspend while overseas as it is a prepaid card and comes with an already set limit.Credit cards come with an overdraft facility that will tempt the traveler to overspend and end up with a huge bill.<h2 class="heading-node" id="1f24">Advantages of Forex card over Cash</h2><h3 class="heading-node" id="400f">Better exchange rates</h3>Forex cards come with better exchange rates when compared to cash conversion. Also, the traveler gets to enjoy locked-in exchange rates that do not fluctuate on a daily basis.<h3 class="heading-node" id="6a8f">Safety</h3>Cash is only safe when it is stored in a vault, and it creates an inconvenience when carried in huge amounts, whereas a forex card is a CHIP and PIN enabled card that offers top-of-the-line security to the traveler.<h3 class="heading-node" id="5b55">Theft</h3>In case of cash theft, there is no possible way to get the money back nor reclaim damages. But in case of forex card theft, the traveler can immediately block the card and request a replacement card, no matter their geographical location.<h3 class="heading-node" id="568d">Multi-currency</h3>It is practically impossible to carry around wads of cash in different currencies as it is neither safe nor smart to walk around with cash. It is a hassle to keep and use the right currency without the confusion around the country’s native currency. Whereas when using a forex card, the card will automatically detect the country and carry out transactions using the preloaded local currency.<h2 class="heading-node" id="cfd4">Advantages of Forex cards over traveler’s cheques</h2><h3 class="heading-node" id="6c46">Modernized version</h3>Forex cards are the software upgrade of traveler’s cheques. They are widely used and come with convenience and comfort at their core. Traveler’s cheques are antique, primarily out of use, and are not accepted worldwide anymore.<h3 class="heading-node" id="6875">Associated Fees</h3>Both forex cards and travelers cheques come with their share of fees and charges. But travelers cheques are a bit on the higher side as they involve traveler cheque creation and encashment plus the usual charges.<h3 class="heading-node" id="714c">Handling</h3>Forex cards are easy and convenient to handle; all it takes is a swipe for a transaction and a few clicks to customize the card. Whereas traveler’s cheques are outdated and hold no meaning in the world of <a class="link" href="https://m2pfintech.com/blog/the-rise-of-digital-payments/" target="">digital payments</a>.<h2 class="heading-node" id="b53b">Why a Forex card?</h2>While Forex cards do allow for frictionless travel, they also come with a host of other benefits such as:It is the safest form of carrying cash, and they are PIN-protected prepaid cards. For example, M2P’s Forex cards enable a traveler to load up to 24 currencies in one card, and it also comes with an app that offers a virtual wallet.They also come with an app feature. For example, <a class="link" href="https://m2pfintech.com/">M2P’s</a> digital travel money app offers the feature of configuring spending limits, channels and block/unblock the card. The traveler can lock in the exchange rates, and buying a forex card is cheaper than cash currency conversion. Also, it saves them fluctuating rates when using debit/credit cards.The traveler can save on transaction fees typically charged by debit and credit cards. They range from 2% to 5% and are coupled with markup fees, applicable taxes, and so on.It can be reloaded from any part of the globe and access a 24/7 customer support team. Travel cards are predominantly accepted everywhere without additional charges.Also, many issuers allow the auto-sweep feature when one currency in a multi-currency wallet goes low. For example, M2P will transfer funds from the GBP wallet to the USD wallet if the wallet balance becomes low when initiating a purchase. It doesn’t require any additional confirmations from the user, and they can easily transact at their preferred platform.It also comes with an ATM feature and can be used in any Visa or MasterCard terminal. Upon return, the balance currency can be converted back into INR without any hassle. Most often, the issuers also offer travel insurance cover along with the forex card.Gone are the days when foreign travel mandated carrying around cash hidden inside the layers of dress and goodies as a safety precaution. With the travel ban slowly being eased in many countries across the world and with M2P’s multi-currency forex cards as a travel companion, today’s globetrotters can enjoy secure and hassle-free travel.<a class="link" href="https://m2pfintech.com/newsletter/">Subscribe</a>&nbsp;to our newsletter and get the latest fintech news, views, and insights, directly to your inbox.Follow us on&nbsp;<a class="link" href="https://www.linkedin.com/company/m2pfintech/mycompany/">LinkedIn</a>&nbsp;and&nbsp;<a class="link" href="https://twitter.com/m2pfintech">Twitter</a>&nbsp;for insightful fintech tales curated for curious minds like you.

Forex cards- International travel made effortless

<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/04/Artboard-1-copy-8-3-1.webp" alt="M2P Fintech" title="" width="100%" height="383">Did you know?PPIs in India grew at a 53% CAGR from 41Cr (May 2017) to 226Cr (May 2021). And the potential for future growth is enormous.New to the PPI world?Here’s a little introduction for you.PPIs are prepaid payment instruments that enable <a class="link" href="https://m2pfintech.com/blog/the-rise-of-digital-payments/" target="">digital payments</a> via mobile wallets, <a class="link" href="https://m2pfintech.com/blog/prepaid-cards-101-a-definitive-guide-for-growth-and-profitability/">prepaid cards,</a> and paper vouchers. They are disruptive business enablers with the ability to accelerate the profitability and growth of enterprises worldwide.But how can you tap into the potential of PPIs?First, you need to understand the dynamics behind PPIs. The infographic below will help you grasp and analyze the evolution of PPIs in India from the era of demonetization to the pandemic. You can tap into its immense potential by comprehending growth factors, current status, thriving possibility, RBI initiatives, and much more.<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/06/PPI-1-aug-11.webp" alt="M2P Fintech" title="" id="xbufzjb8z" width="100%" height="1774"><img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/06/PPI-2-aug-11.webp" alt="M2P Fintech" title="" id="46kompytm" width="100%" height="2165"><img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/06/PPI-3-aug-11.webp" alt="M2P Fintech" title="" id="fjn663498" width="100%" height="2085">Email us at&nbsp;<a class="link au lg" href="mailto:ping@m2pfintech.in" target="_blank" rel="noopener ugc nofollow">ping@m2pfintech.in</a>&nbsp;to issue customized prepaid cards and wallets incredibly fast.<a class="link" href="https://m2pfintech.com/newsletter/">Subscribe</a>&nbsp;to our newsletter and get the latest fintech news, views, and insights, directly to your inbox.Follow us on&nbsp;<a class="link" href="https://www.linkedin.com/company/m2pfintech/mycompany/">LinkedIn</a>&nbsp;and&nbsp;<a class="link" href="https://twitter.com/m2pfintech">Twitter</a>&nbsp;for insightful fintech tales curated for curious minds like you.

Disruptive business enablers -Prepaid Payment Instruments (PPIs)

Prepaid Cards 101- A definitive guide for growth and profitability

<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/05/banner.webp" alt="M2P Fintech" title="" width="100%" height="253">Have you ever noticed the numbers on your credit/debit/prepaid card? They have a string of numbers out of which the first six digits are called Bank Identification Number (BIN). The BIN number helps the merchant processor identify the card type, network, and the issuing bank for the transaction’s approval/decline. For instance, a Visa card starts with the number “4.” Master card starts with the number “5” and “2”, Diners starts with the number “3” and so on.They also enable merchants to accept different types of payments like digital and mobile payments.Now with the explosion of payment electronification and many becoming savvy financially, there has been a drastic increase in the number of card users. This, in turn, has led to a shortage of BINs; if we take a rather dim view, it can be observed as depletion of BINs.To stop this from happening, the International Standards Organization (ISO) amended the existing standard of (ISO/IEC 7812–1) Part 1: Numbering system from Six-digit to Eight-digit BIN in 2017. So, card networks such as MasterCard, Discover, American Express, Visa and others have started prepping for the change.<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/05/Artboard-24-copy.webp" alt="M2P Fintech" title="" id="adfawcve6" width="100%" height="253">Visa has been quite active with this change and regularly issuing updates and ready reference guides for this migration. Visa adopted this standard in 2017 and has urged its partners to migrate to the Eight-digit BIN by the end of April 2022.<h2 class="heading-node" id="69d4" style="text-align: justify">Who will be affected by this migration?</h2><ul class="list-node" id="lbi86ft9q"><li>Acquirers</li><li>Issuers</li><li>Processors</li></ul>MerchantsOn completion of April 2022, the card network’s 100,000 BINs will migrate to 10,000,000 BINs. The first Six-Digits will remain the same in this change, and the following two numbers (00,01,02…) will become part of the Eight-Digit BIN. Also, there will be no need to reissue replacement cards to the customers.Here are the key points that sum up this initiative:<ul class="list-node" id="vxdxnev6w"><li>After April 2022, the existing 6-Digit BINs will continue to function, and requests for new BINs will be assigned in 8-Digits.</li><li>6-Digit BINs will be supported, but they won’t be forced to convert to 8-Digit BINs</li><li>PCI guidance and Visa clearly outline that organizations storing the full 8-digit BINs require additional controls may include expanded scope.</li></ul><h2 class="heading-node" id="f71d" style="text-align: justify">Why the sudden urgency about this migration?</h2>While the standard is out for migrating to Eight-Digit BINs, ISO did say that they are maintaining the other issuing BINs in the six-digit sequence until the deadline of April 2022. The mandate also doesn’t require the removal of Six-Digit BINs. Therefore, the concerned parties must continue supporting both Six and Eight Digit BINs.The time taken for the adoption will significantly vary by the stakeholder. So, even though the deadline is still 10 months away, there is a concern regarding the impact of updating the backend systems. Especially those involved with issuer processing, routing, and other activities need to assess the impact and get ready for the changes.Industry watchers were almost sure that this initiative will call for a longer PAN. Still, Visa has decided to implement the same on the existing 16-digit- PAN structure. It has become quite clear that the decision will affect the PCI compliance of the existing truncation and masking rules. Any organization that stores the full BIN and the last four digits of the card will become non-compliant unless the rules are not modified.The decision did not specify any modification, and it requires organizations to handle 8-digit BIN as cardholder data. But organizations that spent massive efforts over the years to lower their PCI compliance load will face an explosion of responsibilities and remediation efforts. It will probably result in actions, expense, and their own timeline of non-compliance.So, card networks have been encouraging its vendors, agents, partners, and other stakeholders to actively assess the impact they would be experiencing across their systems. This assessment would help them to increase their efficacy and avoid any hurdles when handling transactions.<h2 class="heading-node" id="005c" style="text-align: justify">How does this change impact?</h2>As six-digit BINs are on the decline, it will be challenging to rely on them for authorization, routing, and transaction clearing. The effect might not be immediate but will slowly and surely escalate when Eight-Digit BINs become the norm. Both Merchant and Service providers might face issues in the following scenarios:<ul class="list-node" id="j85h67z8k"><li>Prepaid card’s identity</li><li>Chargeback and Fraud</li><li>Transaction processing</li><li>Merchant services and disputes</li><li>Reporting</li></ul><h2 class="heading-node" id="7198" style="text-align: justify">How to prepare for the change?</h2>Visa has issued directives for both merchants and service providers on how to handle this change. They have explicitly said that the changes are specific and may need to require a timeline extension. So, organizations, service providers, and other stakeholders are encouraged to initiate and pool the resources necessary to prepare for Eight-Digit BINs.<a class="link" href="https://m2pfintech.com/newsletter/">Subscribe</a>&nbsp;to our newsletter and get the latest fintech news, views, and insights, directly to your inbox.Follow us on&nbsp;<a class="link" href="https://www.linkedin.com/company/m2pfintech/mycompany/">LinkedIn</a>&nbsp;and&nbsp;<a class="link" href="https://twitter.com/m2pfintech">Twitter</a>&nbsp;for insightful fintech tales curated for curious minds like you.

The BIN Migration|Preparing for 8-Digit BINs

<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/05/banner1251-13.webp" alt="M2P Fintech" title="" id="hytqs9p1m" width="100%" height="356">We have come a long way in payments starting from the barter system, coins, currencies, paper cheques, and plastic cards to one-click payments, e-wallets, and <a class="link" href="https://m2pfintech.com/blog/blockchain-and-fintech-use-cases-and-applications/">cryptocurrencies</a>. Payment space keeps evolving at breakneck speed with new technologies that focus on bringing more convenience than ever before. Wallets and currencies are now out of action and considered obsolete by the millennials. Ever since the emergence of contactless payments, we are entirely freed from carrying traditional currencies everywhere. Technologies keep providing users with a better payment experience and NFC is one of them.Here is a short story that illustrates the brief above.One sunny morning, the grocery store’s aisle was my runway. I was excitedly grabbing all my favorite drinks and snacks for the ‘Netflix weekend’ scheduled with my friends. So, I head to check out with a happy face and a fully loaded cart. Unfortunately, that is when I found out that I forgot my wallet.So, in this scenario, what was the state of action?Scenario 1:&nbsp;I ran back home to get my wallet.Scenario 2: Got a favor from the shopkeeper to pay him back later.Scenario 3:&nbsp;Forgot all the fuss and used my phone to complete the payment.And nowadays, Scenario 3 is the hero everywhere as people have their cards and applications loaded in their smartphones to make payments anywhere anytime. NFC is one of many such technologies that is smoothing the way.<h2 class="heading-node" id="de52">What is NFC?</h2>The abbreviation stands for Near Field Communication. It is a wireless technology that initiates the communication between two nearby electronic devices to provide the most convenient experience to customers globally. NFC makes the transactions and digital content transfer simpler by connecting the electronic devices using electromagnetic fields.<blockquote class="block-node" id="1eqo4mvgr">NFC initiates the connection at a distance of 4cm or less and operates at the frequency of 13.56 MHz to make secure transfers.</blockquote><h2 class="heading-node" id="ed11">What are NFC payments?</h2>NFC payments are popular contactless payments that use NFC technology to initiate the connection between the reader and the NFC-enabled devices. You can pay using smart devices like mobiles, watches, or simply tapping debit/credit cards. It initiates secured, convenient, fast, encrypted, and touchless transactions at the point of sale.<h2 class="heading-node" id="c903">Mechanism and applications of NFC technology</h2><img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/05/Artboard-1-copy-11-3.webp" alt="M2P Fintech" title="" width="100%" height="284">NFC is a specialized branch out of RFID (Radio-Frequency Identification), a widely used technology for asset tracking, access control, attendee tracking, and much more.NFC creates a short-range communication using electromagnetic radio fields between two devices — one to transit and another to receive a signal, just like how you connect your Bluetooth device.The devices are differentiated into two- Passive and Active. Tags and other small transmitters are considered passive devices since they contain data that other devices can read, whereas active devices can read and transmit data. Such active devices are your smartphone that reads and helps share necessary data with other compatible devices if required.NFC is now introduced in a chip format as well. A beauty salon in Dubai recently introduced ‘chipped nails’ where a tiny chip is embedded in the nails and used to transfer information such as your digital business card or social media handles by just tapping your fingernails on the device. These services can expand to contactless payment systems too.NFC is used in three simple modes:<ul class="list-node" id="wqfacotvm"><li>Peer-to-peer mode:&nbsp;Two active NFC-enabled devices can initiate a connection to read or transmit information between each other. The Android Beam Technology uses this mode to transfer information and enable Bluetooth devices.</li><li>Reader/writer mode:&nbsp;We can read/write information from a passive device (contactless smart card or RFID tags) using an active device(smartphones/smartwatches).</li><li>Card emulation mode:&nbsp;Here, NFC acts as a contactless card, and we can use our smart devices in place of debit or credit cards to make digital payments.</li></ul><h2 class="heading-node" id="9a7f">How do NFC payments work?</h2>Contactless payments are now mushrooming with its wide range of options like EMV chip cards, mobile wallets, QR codes, and digital payment apps for the customers to experience ‘touchless and effortless’ check out and save time during their shopping spree. Moreover, they are a faster and secure mode of payments as there is no need to enter a PIN as it transfers the encrypted data to the NFC device instantaneously.NFC links the payment and reader devices wirelessly when they are closer to each other. Once connected, the payment can be initiated from the payer’s devices like smartphones and smartwatches through the installed payment applications like Google Pay, Samsung Pay, Apple Pay, etc. Then, the payer must just hover the device near the payment terminal, and NFC chips exchange encrypted data for completing the transaction within few seconds.<h2 class="heading-node" id="3528">How do merchants accept NFC payments?</h2><img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/05/Artboard-1-copy-9-2.webp" alt="M2P Fintech" title="" width="100%" height="284">All a merchant needs is an NFC-enabled reader to accept the payments, and that’s that. The shopper can make NFC payments through smartphones, smartwatches, and NFC-enabled accessories — wristbands, phone cases, or rings. These devices have a small chip that communicates with the merchant’s NFC reader via radio waves.The shoppers have now picked their goodies - CURTAINS UP!Now, the merchant ensures the NFC reader’s connection is good to go. The shoppers bring their NFC-enabled device closer, typically within two inches, or simply tap the cards (with contactless indicator displayed on them) on the reader. The shopper unlocks the app with the PIN/use biometrics and selects the card to complete the payment.<h2 class="heading-node" id="32bd">How are NFC and EMV connected?</h2>EMV and NFC are closely connected in changing the payment landscape to hit the big time with secure and encrypted payments. EMV stands for Europay, MasterCard, and Visa — named after the organizations found. EMV is the payment technology that enables transactions with chip-embedded cards, whereas NFC is the digital version of EMV offering contactless payments.EMV payment is carried through the small computer chip embedded in the debit and credit cards. This chip communicates with the POS when dipped to authenticate the transaction successfully. These highly secured payments can be made using EMV-enabled devices and readers. To avoid any fraudulent activity, for every EMV transaction, a unique transaction ID is created, which cannot be replicated. Additionally, the cardholder must enter a PIN/ sign the receipt to complete the transaction. NFC is the technology that facilitates EMV transactions digitally using smartphones giving the ease of not carrying a physical card.On the flip side, NFC payments are contactless and follow tap-and-go technology. As said, gestures like hover or tap are all you need to complete the transaction.EMV is a bit slower when compared to NFC in processing a transaction. So, most customers still prefer opting for NFC to save time in a big queue as it is also as secure as EMV. So, merchants can opt for readers that accept both NFC and EMV payments to provide customers with a seamless checkout offering the latest and stress-free payment options.<h2 class="heading-node" id="bb30">Benefits of NFC Payments</h2>These wireless innovations give a better user experience and prove anything can happen at our fingertips. NFC has changed how merchants and shoppers look at making payments. It has also made both merchants’ and shoppers’ life simpler.<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/05/Artboard-1-copy-10-1-1.webp" alt="M2P Fintech" title="" width="100%" height="284"><h3 class="heading-node" id="6ae9">(i) High-level security</h3>NFC payments are incredibly secure when compared with cash or magnetic-stripe cards. This is because the payment transactions are end-to-end encrypted, and details are highly secured.The customer can pay only at the POS terminal using their devices by providing the PIN/biometrics to unlock the payment screen. Another added security is that NFC payment readers can connect only one device at a time. This can prevent situations like customers paying for the wrong bill.<a class="link au nf" href="https://medium.com/m2p-yap-fintech/how-does-payment-tokenisation-work-d2f47186f718" rel="noopener">Tokenization</a>&nbsp;also plays a major role here. When people use apps like Apple Pay to carry their transactions, their sensitive payment credentials are masked with random strings of characters (tokens) to battle online and digital breaches. This new token is generated whenever you make a new transaction.<h3 class="heading-node" id="ce00">(ii) Comfort and convenience</h3>Shoppers don’t have to carry their wallets everywhere. They can simply use their smart devices for an easy checkout process. Another added functionality is to store multiple debit/credit cards in the payment apps and personalize the transaction according to their needs. Simple gestures like tap, wave, and hover are needed, and the payment is complete.<h3 class="heading-node" id="7719">(iii) Saves time at checkout</h3>Dealing with cash or using magnetic stripe cards consumes more time for both merchants and shoppers. Sometimes, shoppers skip purchasing in a few stores with a long queue in the POS terminal. To avoid such situations, merchants need to upgrade their POS terminal by providing a smooth experience to their customers, which increases their sales. So that, shoppers can save time in the checkout process when they opt for NFC payments. The less time it takes to complete the transaction, the more the customer is satisfied.<h3 class="heading-node" id="86b0">(iv) Touchless &amp; contactless</h3>The corona pandemic triggered the urge for contactless payments. This resulted in a steady increase rate of people opting for contactless payments. As a result, people are slowly opting for contactless payments that guard them against the spread of viruses when dealing with cash or card receipts.<h3 class="heading-node" id="8d5c">(v) Cost-efficient</h3>Since everyone’s best friends is their mobile phones in their everyday lives, NFC payments are cost-efficient for payee and payer sectors. So, the merchants must get an NFC reader and upgrade their payment terminal to seamlessly carry out the NFC payments. This even a small business merchant can afford to uplift their business. NFC reader is the better choice for merchants as it consumes less power too.<h2 class="heading-node" id="z3arn9s6q">NFC payments and its rapid evolution</h2>Contactless payments are omnipresent post the pandemic even though they were already a popular payment method before. Even exchanging money was considered a perilous task during this pandemic, but NFC has come to the rescue with its touchless feature. As a result, most people have upgraded to NFC payments helping businesses to drive their sales and ensure safety at the same time.The stats further strengthen the payment space with all positive predictions.<ul class="list-node" id="qlq2muew4"><li>The global market value of NFC payments is estimated to exceed $10.4 billion by 2026, with more than 14.5% CAGR from 2021 to 2026.</li><li>According to the report by Payments Journal, 30% of the consumers are making their payments contactless after the pandemic. Moreover, 70% who are new to this payment space wanted to continue making their payments contactless even after the pandemic abates.</li><li>The NFC’s market size is flourishing and is expected to touch $30 billion by 2023.</li></ul>The future of NFC payments, as predicted, will remain on the rise and will shape the payment space for the better over the next few years. Fintechs further mold it by offering innovative resources to provide the most convenient payment method for customers.One thing is sure, the NFC payments are here to stay, and the future holds more for payment space.<a class="link" href="https://m2pfintech.com/newsletter/">Subscribe</a>&nbsp;to our newsletter and get the latest fintech news, views, and insights, directly to your inbox. Follow us on&nbsp;<a class="link" href="https://www.linkedin.com/company/m2pfintech/mycompany/">LinkedIn</a>&nbsp;and&nbsp;<a class="link" href="https://twitter.com/m2pfintech">Twitter</a>&nbsp;for insightful fintech tales curated for curious minds like you.

NFC Payments - Simplifying Payment Space

How to implement the best Prepaid Payment Instrument (PPI) for your business?

Future of Digital Payments: Matched With Industry Needs

<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2022/04/banner1251-6-1.webp" alt="M2P Fintech" title="" id="t5u9jgsxm" width="100%" height="317">The advent of international payments has been long-standing in the financial world, facilitating commerce and trade. Be it sending money back home or international business contracts, today’s rising global commerce can be attributed to the growing volume of international digital <a class="link" href="https://m2pfintech.com/blog/future-of-payments-processing-matched-with-industry-needs/">payments</a>.It is a valuable ally for businesses and individuals who wish to enjoy commerce or transactions across borders. The surge in cross-border B2B payments is exponential since the penetration of the internet. With predictions of 30% growth in the next three years, cross-border e-commerce has taken off to exponential heights in these 2 years.Also, the businesses that offer software as a Service (SaaS) heavily depend on cross-border payments as their demographic is spread across the globe. In recent years, these players have played a monumental part in increasing the volume of cross-border transactions.The advancements in Fintech today empower many businesses and individuals to make instant payments. Businesses can experience stress-free invoicing, tax handling, and recurring billing in a few clicks. They also have access to top-notch support portals to handle any issues that arise out of a transaction.Fintech companies experiment with technologies like <a class="link" href="https://m2pfintech.com/blog/blockchain-and-fintech-use-cases-and-applications/">Blockchain</a> to bring more transparency and Artificial Intelligence for better regulatory compliance.<h2 class="heading-node" id="2511" style="text-align: justify">What are cross border payments?</h2>Cross border payments happen when the payee and the recipient are in different countries. These transactions can be retail, wholesale or recurring in nature. Decades back, the electronic messaging system served as a crucial mode to enable cross border payments.The cross border payments industry now utilizes many payment modes like <a class="link" href="https://m2pfintech.com/blog/credit-card-processing-a-definitive-guide/">credit cards</a>, cross-border <a class="link" href="https://m2pfintech.com/blog/what-is-a-payment-gateway-and-payment-switch-understanding-the-basics-of-payments-architecture/">payment gateways</a>, <a class="link" href="https://m2pfintech.com/blog/tale-of-money-transfers-from-hawala-to-one-click-remittances/">wire transfers</a>, e-wallet, distributed ledger technology, <a class="link" href="https://m2pfintech.com/blog/api-the-power-that-drives-new-age-banking-ecosystems/">APIs,</a> etc., every day to facilitate international payments.<h3 class="heading-node" id="d1xc42b0j" style="text-align: justify">Cross-border payment methods</h3>In fact, we can classify cross-border payment methods as Past, Present, and Near Future, where every advancement is an incremental leap in payment facilitation and user experience.<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com//m2p-website-file/marekting-cms/m2p-blog/2025/05/1-1.webp" alt="Cross border payment" title="" id="py8ljf39p" width="100%" height="253">The Past<h3 class="heading-node" id="8e54" style="text-align: justify">Wire transfer</h3>It is an electronic transfer of money, where the money is ‘wired’ from one account to another. If you are initiating a domestic transfer, it is called a “Bank wire.” In the case of cross-border payment, wire transfer is interchangeably referred to as “Remittances.” It is the oldest method of initiating a cross-border payment.<h3 class="heading-node" id="c67b" style="text-align: justify">How does it work?</h3>Here the payee visits their designated branch and provides the details of the receiver. Those details include the bank account number, name, recipient country’s currency, SWIFT code, IBAN (International Bank Account Number), bank address, amount to be transferred, etc.The currency rate is fixed before the transaction. The details are directly sent to the recipient branch or via an intermediary bank. That’s not all; the payee also has to pay certain charges like service tax, conversion charges, and other applicable charges. Based on the instructions, the recipient bank credits the amount to the recipient’s account within 5 working days or more at times.<h2 class="heading-node" id="dd8c" style="text-align: justify">Payment Service Providers (PSP)</h2>A popular option for immigrants, Payment Service Providers (PSP), effect transactions either in the form of physical cash or online payments.<h3 class="heading-node" id="b848" style="text-align: justify">How does it work?</h3>The sender visits the agency with the current nation’s currency and proper ID proof for physical cash. The recipient can visit the agency at his location and collect the money after dedicating transfer charges to completing the ID verification process. For online transactions, the sender visits the PSPs apps or websites. Within a few clicks, money flies over the nations and reaches the receiver’s bank account directly.<h2 class="heading-node" id="8db4" style="text-align: justify">The Present</h2><h3 class="heading-node" id="affb" style="text-align: justify">Credit cards</h3>It is a reliable mode of payment while traveling abroad. A <a class="link" href="https://m2pfintech.com/blog/credit-card-processing-a-definitive-guide/">credit card</a> eliminates the need to carry cash in hand. They also offer attractive benefits like interest-free loan periods (a month or more), reward points, gift coupons, shopping offers, easy EMI options, travel insurance perks, etc.<h3 class="heading-node" id="0caa" style="text-align: justify">Forex cards</h3>Many banks and financial institutions offer <a class="link" href="https://m2pfintech.com/blog/forex-cards-international-travel-made-effortless/">forex cards</a> explicitly designed for globetrotters. They can make money transfers across multiple countries with a single card. It helps the users avoid currency exchange rate fluctuations by locking in the rates while getting the card.<h3 class="heading-node" id="0b4e" style="text-align: justify">Digital wallets, ewallets &amp; mobile wallets</h3><ul class="list-node" id="th56mo1sb"><li>These are virtual wallets that can store money and customer information (credit card/debit card number, date, bank details, etc.).</li><li>eWallets are used like <a class="link" href="https://m2pfintech.com/blog/prepaid-cards-101-a-definitive-guide-for-growth-and-profitability/">prepaid cards</a> where we can store our money.</li><li>Digital Wallets are used to store card numbers, account numbers, expiry dates, IFSC codes, etc. This confidential information resides in the cloud.</li><li>Digital wallets can be used on desktops, whereas mobile wallets can be used on mobile devices.</li></ul><h3 class="heading-node" id="f39a" style="text-align: justify">MasterCard Send</h3>Initiated by the global network provider, MasterCard Send allows both businesses/ individuals to make real-time cross-border payments to the recipient’s debit card number. It does not rely on the bank’s ACH system, so there is no need for a routing or account number to send the money across.<h3 class="heading-node" id="a125" style="text-align: justify">Visa Direct</h3>Visa Direct offers push payments to individuals/businesses across the globe. The business/user can tap into Visa’s global network and send payments in real-time or by a maximum time limit of 24 hours.<h3 class="heading-node" id="c742" style="text-align: justify">SWIFT GPI</h3>SWIFT GPI or Global Payment Initiative aims for transparent and faster cross-border payments. It breaks down all the costs involved, and the payee can keep tabs on where the payment is at any given time. While the older methods of cross-border payments are traditionally mysterious, SWIFT GPI unveils the mystery and significantly increases the speed.<h2 class="heading-node" id="80ee" style="text-align: justify">The Near Future</h2><h3 class="heading-node" id="05b1" style="text-align: justify">Open Banking APIs</h3>Open Banking<a class="link" href="https://m2pfintech.com/blog/api-the-power-that-drives-new-age-banking-ecosystems/"> Application Programming Interface (APIs)</a> aims to simplify the complicated procedures of cross-border payments. As it democratizes access to customer and their data, it becomes easier for fintechs and other financial institutions to build products that address their target demographic version of cross-border payment app.<h3 class="heading-node" id="f3c8" style="text-align: justify">Decentralized Ledger Technology (DLT)</h3>A term made popular by Blockchain tech, DLT can be applied to cross-border payments’ three most challenging aspects. They are backend processes, compliance, and as a means of payment. DLT can speed up the backend process while offering transparency at every step of the transaction. It can also reduce compliance-related costs and can introduce an entirely new method of payment.<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2021/05/2-1.webp" alt="M2P Fintech" title="" width="100%" height="253"><h3 class="heading-node" id="yj7z6hw5g" style="text-align: justify">How do cross-border payments work?</h3>Cross-border payment is a complex mechanism that involves many players. It carries many fees right from currency conversion to the respective country’s tax and other service charges. Both domestic and overseas entities work together to accomplish the transfer.For example, when a software purchase transaction is initiated, the “correspondent bank” requests the money from the “respondent bank.” Here both the correspondent and the respondent bank will have their colleague bank across the globe. So, the funds will leave the buyer’s bank and reach that bank’s counterpart present in the merchant country, ready for remittance. Then the remittance is transferred to the merchant’s bank for settlement. So, in short, banks work with other players like payment service providers; to transfer the money while navigating currency conversions, different tax regimes, transaction fees, etc. Further, slowing down the process.One of the most popular banks for forex settlements is the CLS bank. Founded in 2002, explicitly for mitigating risk and settlement of Forex transactions, CLS works with 18 currencies in cross-border payments. Even though it has been instrumental in making forex payments easier, it does have some drawbacks. With new emerging currencies gaining global transaction volume, CLS is limited by 18 currencies and is yet to catch up with technological advancements of member countries’ payment infrastructure.To create a seamless flow for the cross-border payments, some changes must be incorporated quickly to ensure better penetration across the value chains:<ul class="list-node" id="cp59ifqob"><li>Applications of Real-Time Payments will offer much-needed transparency. The parties involved can track the transaction status anytime. For example, this is what SWIFT GPI is trying to achieve. It has the potential to be replicated in other payment methods.</li><li>The time factor taken to complete a cross-border payment should be brought to days from weeks. Small and Medium Businesses (SMBs) should have better access to these payments as cash flow is the backbone of their operations. Unpredictable delays and complex transactions will hamper its growth.</li><li>Today’s customers, both retail and corporate, are looking forward to solutions that adapt to their evolving needs. They also favor the platforms where the solutions are embedded for all access.</li><li>Customers today prefer a choice of methods and security when initiating transactions. A flexible ecosystem where transaction history, audit, and reconciliation can give valuable insight and a seamless experience.</li><li>Integrations are a much-needed factor to bring about global interoperability and linking fragmented value chains. No matter the transaction origin, the experience of the transaction must be seamless for the merchant.</li><li>Typically, the stakeholders in this transaction flow more often follow the same regulations. They can be bifurcated into ‘front end’ and ‘back end’ stakeholders. The Front-end players are the Tech companies who look at the ‘data’ aspect of the transaction and can have lighter compliance standards. The onus should lie in compliance with balance-sheet exposure, counterparty exposure, and liquidity for the backend players.</li></ul><h2 class="heading-node" id="3198" style="text-align: justify">How is fintech disrupting cross-border payments?</h2>With Blockchain taking the lead in the fintech space, digital currencies can be used in cross-border payments instead of national currencies limited by geography. As digital currencies are built with technology, it provides a bread crumb trail for the transaction trace and reduces the need for intermediaries. Also, the DLT applications of Blockchain can provide transparency and security at the core. Along with these innovations, Fintech also offers the following benefits:<img src="https://m2p-website-file.s3.ap-south-1.amazonaws.com/m2p-website-file/marketing-cms/m2p-blog/2021/05/3-1-1.webp" alt="M2P Fintech" title="" width="100%" height="253"><ul class="list-node" id="4nv0g5ncq"><li>Constant enhancement: Fintech giants are leveraging the latest technologies like Blockchain to make cross-border payments completely transparent and tamper-proof. They concentrate more on the user experience and focus on making complex processes swift and convenient.</li><li>Ease of use: Virtual wallets allow the users to stay free from making a note of all the passwords, account numbers and worry about their confidentiality. You can feed all your confidential information with a single tap and complete your purchase.</li><li>Convenient:&nbsp;Forex cards are travel allies. It makes our wallets light when we are traveling to different countries handling different currencies. We can simply swipe on the retail outlets or wave it with a contactless card. Like an ATM card, it allows us to withdraw the local cash in any country (fed while receiving). The best part is few banks are waiving the ATM withdrawal fees, cross-currency charges, etc.</li><li>User experience:&nbsp;Cross-border payment gateways help businesses to sell across borders. As they comply with PCI data security standards, customers feel secure while buying from a foreign website. Consumers can purchase by simply typing their email ids and enjoy rapid check-out.</li><li>Marketing mate:&nbsp;Businesses can use the buying patterns of the consumers collected through their wallets and retarget them with attractive offers. Wallets offer rewards to buyers in the name of cashback. This money can be utilized only in their portal and increase the sales of the online platform.</li></ul>Over the past decade, cross-border payments industry innovations are drastic and soaring high, with creative Fintech minds entering the space each day. Cross-border payments are no longer a daunting task consuming more time and effort. And we can expect many more innovations that make cross-border payments a secure and transparent exercise.To know more about cross-border payments, write to us at business@m2pfintech.com<a class="link" href="https://m2pfintech.com/newsletter/">Subscribe</a>&nbsp;to our newsletter and get the latest fintech news, views, and insights, directly to your inbox.Follow us on&nbsp;<a class="link" href="https://www.linkedin.com/company/m2pfintech/mycompany/">LinkedIn</a>&nbsp;and&nbsp;<a class="link" href="https://twitter.com/m2pfintech">Twitter</a>&nbsp;for insightful fintech tales curated for curious minds like you.