For decades now, the manner in which we store, access and spend our money has been shifting. Early in our history, precious metals and minted coins held currency value; then came the rise of fiat currencies, issued by governments and without direct commodity backing. This proved to be a revolution in the concept of money as it took on a value of its own. Credit and credit cards in various forms came next—convenient, fast tools to exchange numbers and manage accounts with the swipe of a card or insertion of a chip.
Now we’ve entered a new era where direct card to reader contact isn’t necessary—nor even is the card in our wallet. The rising popularity of contactless payment has resulted in rapid evolution and implementation worldwide.
What Is Contactless Payment?
While the term contactless payment sounds vague enough to encompass a wide range of payment methods like online credit card use, in the physical world of plastic and silicon it refers to fairly specific parameters. Contactless payments operate either through cards or through mobile apps and digital wallets. These payments typically use either radio-frequency identification (RFID) or near field identification to communicate with readers and can only do so at a distance of roughly two to four inches, helping to ensure payment is always intentional.
When used by the average consumer, contactless payment is a remarkably simple process. So long as the retailer has a contactless-enabled card reader, then your mobile phone app or contactless enabled card will automatically complete the transaction once held in close proximity to the reader.
Security and Peace of Mind
Depending on your bank or country of origin, there may be a limit on the amount you can spend per transaction through contactless payments. This can be a total limit, or it can be a soft limit where any amount above the threshold requires a PIN or signature. This policy can differ between banks and countries, so it’s best to keep in mind what your limit is—and talk to your bank about setting your own.
While a transaction amount limit may defeat the ease of use that comes with contactless payment, it also adds an extra level of security. With a limit per transaction, a potential thief won’t be able to spend much before unauthorized spending appears on your account. This helps to mitigate one of the concerns many people have with contactless payment—that without some sort of physical security enabled, theft will become much more commonplace.
It’s also good to know that beyond the payment itself, all the security systems and data protections employed with regular cards are still relevant here, so contactless payment is a remarkably secure system overall. It’s possible that the data transmitted from the card to the reader may get recorded, but that data is encrypted and highly unlikely to be useful to someone collecting it.
There are several options available for those interested in going contactless.
Contactless Cards
The most popular and commonly used types of contactless payment are contactless debit and credit cards. Typically referred to as “Tap to Pay” cards, these devices look the same as a regular card from the exterior, but inside contain a small antenna that allows wireless communication with a reader. These cards also typically come with a magnetic strip and chip, so a card can still be used in more traditional ways if a store doesn’t have a contactless-capable card reader.
Tap to Pay cards have undergone rapid growth in only a few years. In Europe, contactless payment has nearly become standard, with the majority of new cards featuring the service. In the U.S., adaptation has been slower, but its prevalence continues to grow.
Since 2019, all Chase Visa cards have been equipped for contactless payments. American Express and Capital One have also offered contactless cards for some time now. Some other U.S. issuers that offer the service include Bank of America, Citi, Discover and Wells Fargo.
The contactless infrastructure brings more options to the table. In 2018, a study showed that 95% of new point-of-sale terminals are Tap to Pay enabled.
Mobile Apps and Wallets
Other popular contactless payment options on the rise are Mobile Apps and Wallets. These are applications stored on mobile devices allowing many modern smartphones to take the place of a credit or debit card. To use them, you simply enable your smartphone’s contactless pay capability, download the desired applications or link credit cards and credit card accounts to those already installed, and use the phone in the same way you would a Tap to Pay card. Just bring it within two to four inches of a card reader, and the transaction will take care of itself.
Two of the most popular mobile wallets in use today are Google Pay and Apple Pay—services designed for Android and iOS phones, respectively. These services function by connecting a credit or debit card from your preferred bank to your mobile phone’s payment platform. When a user completes a transaction with the app, the service works as a secure intermediary, allowing the transaction to be completed wirelessly.
While mobile apps and wallets may seem like an unnecessary extra step, these technologies do provide some added comfort and security by adding another layer of separation between card information and the transactions you complete daily.
These services also offer added security by requiring users to provide transaction authorization from the phone. This means a fingerprint, face identification or code will be requested whenever a transaction is made.
An Evolving Industry
Contactless payment is an evolving technology and its potential uses are still being discovered. Fusions of the above-mentioned implementations are already being created and enacted. For example, the first biometric payment cards are now available—credit and debit cards featuring a fingerprint scanner to combine the comfort of a card with the security of mobile apps.
Services like Revolut and Cash App are now offering services similar to Google and Apple Pay, while offering easier ways to transfer money between currencies and between people. As financial management moves more and more into digital spaces the technology will only grow in popularity and availability.
Bottom Line
Tap-to-pay cards and mobile wallets provide contactless payment options that reduce the amount of contact required and have seen a major increase in popularity in recent years, especially as the global Covid-19 pandemic continues to infect the globe. While security features are included on contactless cards, mobile wallets may offer better security by requiring biometric inputs or other security. Contactless payments are widely accepted with most new terminals accepting some form of mobile payment and many vendors even encouraging the practice.
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October 20, 2021 at 08:00PM
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What You Need To Know About Contactless Payments - Forbes
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