Contactless Cards

Introduction

The payments industry has changed and developed drastically in the last 10-20 years and cash has been reduced to the third most common payment form in the UK (behind debit and credit card payments). Nowadays we have the ability to make fast payments with contactless cards meaning the need to carry wallets and cash has been negated, especially as contactless cards make payments remarkably easy and improve the payment process for all involved.

 

What are they?

Contactless cards are essentially just a form of payment – a secure method of purchasing products using a debit, credit or smartcard. This is achieved by a simple tap of your card near a point-of-sale terminal that is equipped with this payment technology. A definition by Investopedia is:

“A contactless card is a physical card that is part of a contactless payment system, which offers more convenience than traditional point-of-sale payment systems where customers use standard debit or credit cards.”

Contactless cards are the main source of payment in the UK and therefore is the reason why all the main suppliers of cards supply contactless payments cards.

 

Why Security is important

With contactless cards, security is very important for everyone involved, for the cardholder and also for the provider of the card. If you carry cash and lose it, there is no way to get this money back (unless you find it). But with card fraud, you will get your money back from the bank, so it is important for banks and the providers of cards to have good security in an attempt to mitigate this risk. As well as this the cardholder doesn’t want to fall victim to card fraud even if they get their money back as this can consume time and effort reporting this and receiving the money back from the bank.

The reason why contactless card payments have a cap on them is because it does not require a signature or a PIN (personal identification number), and because there is no signature or PIN verification required, contactless was implemented to be limited to small value purchases. A lack of authentication provides a window during which fraudulent purchases can be made while the card owner is unaware of the card’s loss.

 

How do they work?

These contactless cards have some very interesting and intuitive technology which makes them work. First of all, they contain a chip that holds the account information and an antenna that picks up power from a signal that is sent out by a card reader (a face to face card terminal, etc.).

But how does this technology result in a payment? And are their security concerns? Contactless cards use Near Field Communication (NFC), that allows two devices to securely transmit and receive information, but they must be close to each other to work. These cards “use a 13.56Mhz radio frequency technology that only transmits digital data within a very short range.” (Gemalto.com). This shows how the cards will only work when they are close together, which negates most of the security concerns with contactless cards as fraudsters can’t read the card details from a distance.

 

Contactless Cards

 

Why as a business do you need to take card payments?

So far, I have given some background to contactless cards, what they are and how they work, which has some interesting information you may not have thought about when using these to make a contactless payment. However, I will now describe the benefits of contactless card payments. For both customers and merchants these will be crucial to your company’s profitability especially in the current monetary climate (cash being the third choice of payment):

  • Is fast and convenient – for both businesses and customers (takes 15 seconds or less).
  • Provides safer transactions – encrypted data and the chip in debit and credit cards gives off a unique transaction number (making it very difficult to steal your information).
  • Keeps your information secure – contactless cards do not use the card number when processing a payment, this is good for safety reasons. But also means your business does not have to store the card’s information so it adds another layer of security to transactions.
  • Simple and effective – Shoppers do not have to worry about remembering PIN numbers, this reduces human error so as long as they have the money and it’s under £30, they can purchase your goods or service.
  • Shorter queues – this gives your business the capacity to accept more purchases and improves customers’ experience of your business.

(adapted from – business-achiever)

 

Conclusion

Contactless payments are amazingly simple and effective and are still progressing forward with the ability for mobile payments with contactless. This is done by uploading your card details onto your electronic wallet and this has similar technology to allow you to quickly load up the card to pay with contactless. Whilst this demonstrates the continued development and progression of this method of payment it also highlights the demand for quicker, easier payments by consumers.

So, what is next for contactless cards? I believe the possibilities for contactless cards could potentially be endless and could be developed massively. Convenience is hugely desirable for customers and this will push the development of contactless payments cards, the only issue is security and the limit on this type of payment. However, biometric cards are being trialled and this doesn’t affect convenience. Another reason why contactless cards are likely to grow exponentially is due to FinTechs. These types of businesses have meant that customers can organise their finances from a computer or a smartphone, whilst previously opening a bank account would require you to enter your nearest brick and mortar high street bank branch, meaning that contactless payment cards are also simplistic (easy to cancel, easy to manage, etc.).

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