About
Contactless payment is a way of paying for products and services. With todays hectic lifestyle time and convenience are key and that is why contactless payment, that was always considered a future product, is now very much in the present. Every major card issuer in the UK will very soon or has already issued theircredit cards with a smart chip in addition to the usual magnetic stripe. This includes Visa and MasterCard.
These cards are branded under different names including Visa® payWave™ and MasterCard® PayPass™. Visa has predicted that there will be over 400 million contactless cards in circulation by 2009.
How does it work?
Contactless payment cards use the latest technology to send card data via radio frequency to a contactless card reader. The cardholder simply holds or waves their card in front of the secure reader, waits for an LED and a beep which signals that the transaction has completed. The contactless payment card reader is attached through a cable to a standalone terminal or a point of sale system and is similar to, and might even be embedded within, Chip and Pin readers/pinpads.
Instantly the transaction data is routed to the processing network in exactly the same way as magnetic stripe and chip and pin cards you are probably used to. It should also be noted that these cards use very short radio waves (Radio Frequency Identification or RFID) and are secured by the same technology that chip and PIN uses. Although paying with a card using the contactless interface does not normally require a PIN to be entered, the chip on your card will track activity and (for security purposes), from time to time you will be prompted to enter your PIN. This is to confirm that the legal card holder is in possession of the card, and to deter and limit potential fraudulent use should the card be lost or stolen. Each time a PIN is used it confirms that the cardholder is still in possession of their card.
Contactless Payment and Consumers
As well as speeding up the transaction, customers also like the idea that the card never leaves their hand. Visa, MasterCard, and American Express have all come up with rules that dispense with the requirement for a signature for most purchases under a certain amount (about £10-£15), making the transaction even faster. Some issuers will also providing consumers with keyfob cards freeing them from having to search their wallet or pocketbook. As well as these keyfobs, major mobile phone manufacturers have or soon will be including a special chip in their new phones so that consumers can securely have their credit card data in the phone and then simply wave or hold their phone in front of the card reader. No more fumbling for coins or having to open their handbag, purse or wallet in a line of strangers. One other important point is that there is also zero liability for unauthorised purchases.
Contactless Payment and Merchants
Merchants, especially those in time sensitive businesses, like speedier transaction times resulting in steadily moving queues. Studies have proven that contactless payments are significantly faster than traditional magnetic stripe cards (by 53%) and cash (by 63%). Consumers tend to spend more on purchases with contactless cards versus cash purchases at the same location. It will attract new customers who have received the card and want to try it out and then keep them coming back because it’s so easy to use. In addition, it sets you apart from merchants who have not yet embraced this newer technology.