Cloud vs Payment

With the introduction of Apple Pay -and HCE before that, we started hearing about cloud payments. My initial reaction to cloud payment was “what kind of payment isn’t already in the cloud?”

In generic terms, cloud refers to data and applications that are not stored locally, but over the internet which people can access from any device, anywhere, any time just by having an internet connection.

When it comes to payment, everything was already in the cloud for like ages. The access devices to cloud was plastic cards and payment terminals. Everything was happening through online systems which was simply cloud.

So what is cloud payment in this context?

Cloud payment refers to the tokenization of current payment forms (plastic cards and their numbers) into the cloud. The device (generally a mobile phone) storing the card number has only the token of the real card number. What is token? Token is a replacement of the actual number that is usable only for a certain period of time. So that if someone steals your account information (card number), it will simply be not usable.

Almost anywhere in the world, except the US, having the card number and the expire date or the magstripe data -which is readable by off the shelf readers- isn’t enough for making a payment transaction. Thanks to EMV and 3D Secure/SecureCode, you need more than than card data, you need password and cryptographic keys. Rest of the world has been migrating to more secure payment era but the US is the weak link for a long time. Now with the cloud payment -and the EMV mandates for the US of course, US is getting on board as well.

Cloud payment is actually tokenization. Tokenization requires a smart device which can communicate with the tokenization server over internet and tokenize (change)  the sensitive card data. And of course the smart device is a smart phone. In today’s world, when we say smart phone, we mean Apple and Android. They are different ecosystems but have the same usability approach to smart phone owners.

Apple finally integrated the NFC chip into the iPhone 6. Apple worked on the payment experience a lot and have come up with something just as expected from Apple. A very convenient user experience and a very tightly controlled environment.

Android has been playing with NFC for a longer time but everyone else was waiting for Apple to get on board for mass adaptation. Android has almost same workflow with Apple, with one big exception; the payment application is software based while Apple took the more secure way -hardware. From the end user perspective, everything is mostly same.

So, what now? It is time to talk about contactless terminals. Apple and Android ecosystem is getting ready for the cloud payments, yet the biggest requirement is still the acceptance devices. Hopefully, Apple will be the main driver here. But for that to happen, Apple must move outside the US. Europe and Asia has had a contactless wave before but it didn’t hit the masses. With the cloud payment, I am hoping that it will be different this time.

We are waiting…

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