Invisible Payments

Table of Contents

1. What are invisible payments?
2. What kinds of invisible payment systems are there?
3. Are invisible payments secure?
4. How will invisible payments affect chargebacks?
5. The future of payments
6. How does Amazon One read your palm?

Every merchant knows that when it comes time for a customer to make a payment to complete a purchase, any little bit of friction can lead to annoyance, second thoughts, and a lost sale. Once consumers get used to an easier way of paying for things, they're rarely happy to go back to a method that's less convenient.

“Seamless” transactions have been the watchword for a while, but the industry is now turning its eye toward idea of invisible payments. What are invisible payments, how do they work, and what do merchants need to do to prepare for this new way of conducting transactions?

The term “invisible payments” refers to transactions that can be initiated and completed without any specific transaction-oriented interactions that we would normally associate with making a payment. There aren’t really any rigid standards or definitions for what counts as an invisible payment yet, as retailers and financial institutions are still in the process of innovating new ways for customers to make easier, faster payments.

Current trends are pushing all parties in the direction of removing single-purpose payment instruments and “checkout”-type interactions from the transactions process wherever doing so is feasible.

For merchants, innovation in the payments space always means two things: opportunity and risk. By accepting new forms of payment, merchants can attract early adopters and younger, more tech-savvy customers. On the other hand, new payment methods always invite new forms of fraud, and can cause confusion among some customers. Either one will inevitably lead to chargebacks.

Whenever a new way of handling transactions takes hold in the payments industry, avoiding implementing it for as long as possible usually isn't the right move for most merchants, but rushing into new technologies that you don’t fully understand can also be a recipe for problems. As always, the answer is to educate yourself as best you can about what these innovative technologies involve and make a plan for how you can safely and securely integrate it into your business operations.

What are invisible payments?

It’s helpful to think of invisible payments as the latest step in an ongoing evolution of payments as they progress toward increasingly effortless, hassle-free forms. For a long time, credit and debit cards were the simplest way to pay for things—no need to carry specific amounts of cash around, no need to write out a check, just swipe and sign and you’re done. Smartphones gave rise to the digital wallet, which allows customers to make contactless payments by unlocking the device, holding it near an nfc-enabled terminal, and confirming the payment.

The next evolution from contactless payments are transactions that don’t require a payment device at all.

Specifically, the idea behind invisible payments is eliminating the need to provide any additional credentials for authentication. Instead, the invisible payment system automatically recognizes and authenticates the customer, often with biometric data.

What kinds of invisible payment systems are there?

One of the first concepts for implementing invisible payments was RFID chips. The idea was that each individual product would be tagged with a chip embedded in the packaging, allowing the items to be scanned all at once as the customer leaves. Some implementations of this idea had the customer still scanning their card or mobile wallet at a kiosk on the way out, while others floated ideas like loyalty cards with their own chips that could be tied to the customer's payment method of choice.

There were some early indications that this idea would take off, with Walmart announcing in 2004 its intention to require suppliers to include RFID tags in their products. However, even with the low cost of these chips, it was decided that requiring them to be used in every product, even those that might cost less than a dollar themselves, would cut into profits too much.

In recent years, Amazon has been at the forefront of the invisible payments space, and has implemented invisible payment technology at its Amazon Go stores. Shoppers with Amazon accounts scan a code at the entrance with the app. Then, they can simply pick up the items they want to purchase and walk right out the door with them.

Cameras throughout the store keep track of each individual customer as they enter and go about their shopping, recording anything they take from the shelves and placing the item in a virtual shopping cart, with checkout happening automatically as the customer leaves.

Amazon has also introduced Amazon One, a service that links payment cards to your unique palm print. This allows customers to make payments simply by holding their hand up to a scanner, and does not require an Amazon account.

In China, Alipay offers a “Smile to Pay” system that uses facial recognition to complete transactions. Other companies are experimenting with invisible payments facilitated through Internet of Things technology.

Are invisible payments secure?

The million-dollar question with invisible payments is whether unobtrusive, automatic authentication that requires no input from the customer can be kept safe from fraudsters. Because invisible payment systems seek to do away with cards, mobile apps, wearables, and other transaction-facilitating accessories, it typically relies on biometric data, machine learning, and artificial intelligence to prevent abuse.

Palm and finger prints, retinal and facial scans, voice recognition, and related methods may be used to trigger and verify invisible payment transactions. Biometric data such as this is extremely difficult to copy or falsify, and so these methods have a high degree of security.

However, loopholes and exploits in new technologies often aren’t discovered until they achieve widespread use.

It’s important to stay on top of cybersecurity news, patch and update your systems regularly, and be aware of any low-tech schemes, such as phishing or social engineering, that may be used to get around sophisticated identify verification methods.

Some versions of invisible payments technology may face more obstacles in the way of widespread adoption than others. For example, facial recognition technology has become a focal point for privacy concerns in recent years, and the higher rate of false positives for people with darker skin has only added fuel to the fire. In addition, any technology that has false positives at all can't be used as the sole method of identification in payments, and can only be used to verify and track a known identity, lest a charge be made to the wrong account.

How will invisible payments affect chargebacks?

The impact that invisible payments will have on chargebacks remains to be seen, as only a select few retailers are currently utilizing invisible payment systems.

Chargeback rules will apply to any payment that ultimately gets charged to a credit or debit card, but some invisible payment systems may use proprietary funding methods that can set their own internal rules for transaction disputes.