The payments industry has undergone seismic shifts in a relatively short period of time. Emerging trends have become ubiquitous in a matter of just a few years and innovation is thriving.
As a result, the payments industry is awash with jargon and unfamiliar terms. We see that the pace of change can create confusion for businesses who are looking for solutions such as ours.
As a result, we’ve decided to put this glossary of cashless payments industry terms to help you navigate through the cashless payments landscape.
In part, cashless payments refers to any exchange of value that does not involve actual physical currency. A cashless payment system operates without any involvement from a bank or other third party payment provider. Instead, end users (event attendees and vendors for example) directly join a payments system.
Cashless payment systems allow organisations to collect first party data on their audience. Tappit’s RFID wristbands and Tappit Mobile Pay are both examples of cashless payment systems.
Contactless payments are made in close proximity to a reader. Contactless payment technology enables payment transactions via a contactless chip embedded in cards, tags, key fobs and smartphones. The chip communicates with a reader device that uses radio frequency identification (RFID) or Near Field Communication (NFC) technology.
In the US, contactless payments are more popularly referred to as “wave and pay”, “touchless payments” or “tap and go.”
Contactless payments utilise a third party payment provider, such as a bank to process transactions. The payment provider owns the first party data.
Closed loop payments
Closed loop payment systems allow users to preload money into an account that’s linked to a payment device. This account is linked to one specific company and can only be used there. There are no third parties or intermediaries involved in handling the transactions. Starbucks was once of the first to offer a closed loop payment system within it’s hugely popular Starbucks app. Tappit’s RFID wristbands and Mobile pay products are both examples of a closed loop payment system.
A digital wallet, or e-wallet is a system where a user stores their credentials. This could be bank account details or debit card details for example. When the user wants to make a purchase online or in-store they can access their digital wallet to do so. Digital wallets are mainly used for online transactions and aren’t necessarily used on mobile devices only, they can be accessed on desktop too. The user’s money stays within their bank account unless they make a transaction.
First party data
Data that a company collects directly from its customers or audience with consent. The company owns this data and can use it as a powerful tool to both understand and market to its customer base.
Mobile payments (which encompass mobile wallets and mobile money transfers) are regulated transactions that take place through your mobile device. Mobile payments can include peer to peer digital payment transfers such as a BACS payment online or the use of mobile wallets.
A type of digital wallet that is tied to a mobile app or wearable device. Mobile wallets are the electronic version of a physical wallet. When using a mobile wallet, payments are pulled from a credit card or debit card, rather than a cash balance. Apple Pay, Samsung Pay and Google Pay are all examples of popular mobile wallets.
Tappit’s Mobile pay is an example of a mobile wallet that operates on a closed loop payments system.
Stands for near-field-communication and is a short-wave wireless technology that allows mobile devices, contactless cards and other enabled devices to communicate with each other over short distances of around 4 inches. Instore contactless payments, Apple Pay and Google Wallet all utilise NFC technology. NFC is a technology that evolved from RFID.
Stands for Radio Frequency Identification and like NFC, is a form of wireless communication. Data is stored on an RFID tag (typically wristbands, key fobs or lanyards) and this data can be transferred between the tag and an RFID reader on a one-way communication basis. RFID technology uses radio waves and allows specialist devices to use radio waves to capture the data on a RFID tag. This is then transmitted to a back-end computer system. RFID uses a one-way communication process and tags can be read from a much longer distance than NFC.
Open loop payment system
Open loop payment systems are connected to the banks or other institutions that act as intermediaries. Payments can be made at a wide range of locations that are approved by the card issuer. Mastercard and Visa are both examples of open loop payment cards. With open loop payment systems, the banks and financial institutions own the customer data.
QR (quick response) code
QR codes, or quick response codes are a type of matrix barcode where information is stored in a set of pixels in a square-shaped grid. When scanned by a digital device, the stored information can be easily read. QR codes have become ubiquitous since Covid and are a popular way to make mobile payments. Today’s smartphones come with built-in QR code scanning technology.
A common term in the US also used to describe contactless payments.