The modern credit card industry and credit card processing began in the 1950s, and the first credit cards were simply a platen upon which a number was stamped so it could be transferred to a carbon paper receipt through the use of an imprinting machine. These receipts were then “deposited” through merchant accounts to serve as records of transactions.
These machines formed the foundation of the credit card payment system for many years until electronic payment systems made it possible to read information stored on a magnetic stripe on the back of each credit card. Although manual payment machines are still in use, banks charge more to process manual transactions, which makes electronic systems more economical.
Now, the industry is ready to take the next step with a process called “contactless” payments. The new chip and PIN regulations and upgrades for credit card processing equipment and merchant accounts will make it possible for cards so equipped to broadcast an encrypted signal when placed near a machine designed to read that signal and process a transaction.
The card and the machine never need to come in contact with each other. This is why the system is called “contactless.” A second type of contactless payment system makes use of a design called a QR code. QR stands for “Quick Response.” It is a symbol unique to a certain combination of information that can be “read” optically with the use of a camera or specialized scanning equipment. To make a payment using this system, a merchant can provide a customer with a code unique to their transaction, or the customer can alternatively provide their account identity with the QR code in much the same way they provide the same information with a credit card.
The reason this kind of contactless payment system is growing so fast is because it is possible to integrate QR codes with mobile devices as easily as snapping a picture or putting the phone viewing screen in range of an optical scanner. Because the information is changeable, it also means that each transaction can be keyed to a particular customer, making fraud and inaccurate transaction records nearly impossible.
These kinds of payment systems are generally lauded for their speed, but merchants and customers are increasingly finding the enhanced security features of such payment devices are worth the extra expense and the shallow learning curve as businesses grow used to using the new card readers, optical devices and are comfortable with the use of a customer’s mobile phone as the transmission device for payments, coupons and other kinds of business-to-customer interactions.