Digital payment technology has been around for a long time and is constantly evolving. Mobile devices are now ubiquitous and we can pay using our smartphones or smartwatches with NFC technology. It isn’t a recent invention. Online banking has existed for decades. But how does it work? Market Business News created this image. What is the process of online banking? How is online banking possible? The HTTPS protocol encrypts your log in so that only you and your bank know what you’re doing. You can access the same website to view your funds. To do this, log back in with your credentials stored on the server. Session-based authentication is the most common type of “log in”. This is good for logging in to bank accounts because it prevents anyone from accessing your account if you don’t close the session. What is the most interesting part? How do you know your money is in there? They aren’t there in real life. You might find that the numbers in your account are not represented physically by money. What is the best way to do this? It isn’t the account numbers that matter. This number is closer to a representation of your money, just like an ID card contains details about you and other information. Imagine that you have EUR 10,000 in your bank account. The bank tracks how much money is in your account by moving those numbers. Your bank will always have an accurate record of where your money is located and what they’re doing. Although the idea of moving these numbers may seem like a metaphor, it does help to understand how everything works. The computer system does not move money from your bank. Your bank just knows you have EUR 10,000 at Bank X. It is as simple as changing the numbers in the database when you attempt to transfer money between account A (for instance, your savings), and account B (for instance, your bank account). Online banking via your smartwatch or smartphone is the same. This simply means that your smartphone or smartwatch connects via NFC to an ATM machine, contactless card reader, and works in the same way as a computer. Your ID number (your bank account), then your PIN code are all that is required to log in to your account. However, it’s not known what happens underneath the hood. Although everything is encrypted, your bank will be able to see what goes on within the system. Is it possible that your bank will send a money envelope to you when you make a payment online? It’s not. While it is just numbers being transferred, the envelope has an important meaning. Online payments are a way for money to leave your bank account and move somewhere. Ask your bank to find out the destination of these funds. This is similar to looking through transaction histories. No physical items are being moved from one location to the next. Is there any physical money left in the bank? It’s true that the bank doesn’t have physical money for every client account. Although physical cashiers may not be available in all banks, it does not mean they don’t have cash at their ATMs and safes. Some banks are using virtual money almost exclusively. The banks still hold tens to hundreds of billions in Euros and Dollars so that they are able to send real money when you require it. Future of digital payments. Things are changing. We have seen many changes in the past few years. It is obvious that we are well past the time when card contactless payments were a novelty. It is becoming more common to pay with smartwatches or phones. Next, what’s the best way to do it? First, and most importantly, you won’t have to scan your fingerprint or enter a password every time you pay for something. Most online payment systems today use two-factor authentication. You will need to input your ID number, such as your bank account or PIN code. Your bank will also know the code and it will send it through your smartwatch (or phone). The next step involves authenticating ourself when paying for online payments. We will be able pay online with our phones, but not by leaving fingerprints or faces on terminals. However, our bank account ID numbers and authorizations will allow us to make payments using our smartphones. Combining cryptology with secure elements (secure chips that are already on all mobile phones) could make this possible. To migrate to this solution, banks and central institutions like Visa and MasterCard will need to support you. Although there are many manufacturers of secure elements, they tend to concentrate their efforts on different business areas such as automotive (car keys), governmental administration (ID cards), and secure communications services (even the governments use encryption for their messages). It is not fast enough, secure or responsive enough for use as an app processor for mobile payment applications. This too could change. Let’s wait to see what happens with service providers that are keen on connecting cryptocurrency money to customers’ ewallets. While we will definitely see some changes in the future, let’s wait to see how far humanity can take us. We have only seen the beginning of things. Microchips? Although it sounds like science fiction, we don’t know what the future holds. Digital payments are bright. Because it’s just starting to crawl, we can confidently say that. Related article: What is an eWallet?
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