The card scheme ecosystem has been around for decades and has continuously evolved to meet the demands of consumers and merchants for how payments are transacted and processed. One of the latest advancements in the payments industry is the use of data over sound technology, which enables transactions to be completed using inaudible, nearly ultrasonic sound waves at prescribed proximity ranges.
These sound waves are generated by a mobile device or a point of sale (POS) terminal and can be received by another device equipped with a microphone. This advanced technology has been adopted by several companies and is being used for a range of applications, including mobile payments, contactless payments and authentication. The card scheme ecosystem plays a crucial role in facilitating the smooth functioning of payments globally and data over sound technology is one way to accomplish this. In this blog, we will take a deep dive into the card scheme ecosystem; how it works, and how it is adapting to sound technology.
Card Schemes Explained (Domestic and Worldwide)
The card scheme ecosystem is composed of three key players: cardholders, merchants, and card schemes. The most well-known card schemes are Visa, Mastercard, American Express, and Discover. These card schemes operate globally, connecting millions of merchants and cardholders worldwide. Card schemes provide a range of services that include:
- Settlement of transactions
At the heart of every card swipe is the card network, sometimes also referred to as a card scheme. The major networks in the U.S. are Visa, Mastercard, American Express and Discover. China has China Unionpay, Japan has Japan Credit Bureau (JCB), and while not “technically” considered card networks, Alipay and PayPal are in fact, a type of payment network.
When a cardholder makes a payment, the card scheme checks with the issuing bank to detect whether or not the card has sufficient funds to complete the transaction. Clearing involves exchanging information between the cardholder’s issuing bank and the merchant’s acquiring bank, while settlement is the transfer of funds between the banks. The card scheme plays a critical role in ensuring that these processes are completed securely and efficiently. But what happens when there are insufficient funds?
Being notified by an issuing bank that you have insufficient funds could mean there’s been suspicious activity tied to your account. In addition to authorization, clearing and settlement, card schemes also provide value-added services to their customers.
These services include (but are not limited to):
- Fraud detection and prevention
- Payment balance alerts
- Dispute resolution
- Loyalty programs
Like data over sound technology, card schemes invest heavily in developing and implementing security measures to protect cardholder data and prevent fraud.
The Importance of Sound Technology in the Card Scheme Ecosystem
Aside from merchants and banking institutions, the card scheme ecosystem involves many players: payment processors, independent sales organizations (ISOs) and gateway providers. Payment processors provide the technology and infrastructure needed to process card payments, while ISOs act as intermediaries between merchants and acquiring banks. Gateway providers provide the software needed to enable online transactions. One of the most significant advantages of data over sound technology is that it does not require an internet connection, making it an ideal and secure solution for managing payment transactions in areas with limited connectivity.
Sound technology also provides a more secure method of transmitting data than traditional methods, such as Bluetooth or NFC, because data is transmitted using sound waves that are difficult to intercept. The adoption of data over sound technology in the card scheme ecosystem is still in its early stages. However, several card schemes have started to explore the technology and its potential applications. Visa, for example, has launched a pilot program in Turkey that uses data over sound technology for mobile payments. The program enables cardholders to make payments using their mobile devices by generating sound waves that are received by their POS terminal.
Mastercard is also exploring the use of nearly ultrasonic data for contactless payments. The company has filed several patents related to the technology and has partnered with several companies, including Verifone and LISNR, to develop its applications. LISNR’s tech is being used in Europe, Africa, Mexico and Southeast Asia, in addition to the United States. Taking advantage of Mastercard’s authentication, biometric and tokenization services, LISNR is able to use data over sound technology to make payment transactions safer for retailers all over the world.
Compelling ROI of Data Over Sound Technology
Data over sound technology has the potential to revolutionize the payments industry. Its secure and reliable method of transmitting data, coupled with its ability to operate without an internet connection, makes it an ideal solution for areas with limited connectivity. The technology could also provide a more accessible method of making payments for people who do not have access to traditional payment methods. Additionally, by only requiring a speaker and microphone to operate, sound technology helps reduce hardware costs for merchants by eliminating the need for NFC payment terminals. That’s a significant savings, considering the average NFC terminal costs anywhere from $500 to $1000 per unit.
Merchants pay fees to acquiring banks for the processing of card payments. These fees are usually a percentage of the transaction amount, with a fixed fee for each transaction. The acquiring bank, in turn, pays fees to the card scheme for using its network and services. The card scheme fees may include interchange fees, which are paid by the acquiring bank to the issuing bank for each transaction, as well as network fees, which are charged for the use of the card scheme’s network. Imagine being able to eliminate these fees by simply transmitting data over sound waves from one device to another.
LISNR is a Proven Leader in the Card Scheme Ecosystem
The card scheme ecosystem is constantly evolving, driven by advances in technology and changes in consumer behavior. Mobile payments, contactless payments and digital wallets are some of the latest trends in the payments industry and card schemes are adapting their services to meet the demands of the market. At LISNR, we help you adapt while taking payment transactions to a whole new level with our advanced checkout experiences. Contact us today to experience the most advanced ultrasonic data-over-sound platform available in your market.