ABCs of Payment Innovation: Assets, Backbones and Chips

Chips: chips need not be hardware-based. Software such as QR codes for payments can transform generic screens and bar code readers into custom-built payments hardware. Certain hardware data interchange tokens such as RSA tokens (just to pick one) rely on software for their core functionality. Web integration, which requires extensive engineering and graceful design, can give a pure software equivalent of a hardware chip, essentially creating a new front end web-based transactions with existing payment credentials. With any of these novel chips, existing issuers and network operators can choose to integrate their offerings with the innovators; and they need not be threatened by the march of technology.

The purpose of payment hardware is to encode account information in order to ensure accuracy of transaction details and raise the costs of forgery. Novel electronic standards can improve if they raise the accuracy of payment instructions, raise the cost of forgery, speed up payment tender, or drop the cost of adoption. Payer and payee hardware are frequently not symmetric.

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