Contactless payment cards

[Martin Roberts]

Contactless payment systems include credit and debit cards, key fobs, and other mobile devices such as smartphones that allow you to make secure payments by simply swiping the card or other device over the reader's terminal. Although there are some similarities between contactless payment and mobile payment, which can also be done on your smartphone, the main difference between the two is that mobile payment usually uses a wider cellular or Wi-Fi network, while contactless payment uses requires great physical proximity.

Contactless payment cards are normal chip-and-pin cards with an additional antenna that enables secure contactless communication between your card and the reader. Typically, contactless credit and debit cards have a maximum range of about two inches, which means that they have to be held fairly close to the reader in order to receive its radio frequency. As soon as the signal is received by the card's antenna, the payment is processed. Requiring close proximity also helps avoid accidental and erroneous payments. On the subject of bad payments, let's discuss the main advantages and disadvantages of contactless cards.


Advantages and disadvantages of contactless payment

Some bank customers are concerned about the security of contactless cards. The top security concerns relate to what happens if you lose your card or it is stolen. The answer is that unless you can block your card before someone tries to use it, you are very likely to lose a small amount of money. The good news is that banks have come up with several security tricks to minimize the risk of losing money in the event of theft. All contactless cards have relatively low limits on the amount you can spend without entering your PIN. These limits vary from country to country and range from 10 EUR in the Baltic States to 1000 CNY (~ 137 EUR) in China. In addition, many banks require you to enter your PIN after 3-5 consecutive contactless payments, even if the transaction does not exceed the spending limit. If your card eventually falls into the wrong hands and you lose money, your bank may offer a refund.

Still, it is believed that banks see contactless payment as a way of making money with shopkeepers who pay the cost of merchant terminals that support contactless payment and processing transactions, at the expense of the safety of customers' money. These costs could explain why relatively few merchants in some countries offer the option of paying with contactless cards. This means that you may no longer be able to use the contactless payment method on your new card.


Contactless payments — the future of bank cards?

The main advantages of contactless payment cards are convenience and the time saved for every transaction. These are the two key reasons why bank representatives believe that contactless payments are the future, not only of credit and debit cards, but of minor payments in general. Technological advances are increasing the popularity of contactless payments among customers as well as retailers. According to MasterCard, approximately one billion contactless payments were made in Europe alone in 2015, which is a 150% increase in comparison with the previous year.

One thing to consider before declaring contactless payments to be the future of our everyday transactions is the limit on each payment. Currently, contactless payment can be used for only a small proportion of transactions due to low spending limits, which vary from country to country. Therefore, at some point banks will be faced with a serious decision — between increasing these limits, which might jeopardise the safety of their customers' money, and keeping the volume of contactless payments at a certain level.


Banks offering contactless payments

One bank that has been very keen on contactless payments is Barclays. Back in 2010, Barclays had already started switching its regular credit and debit cards for new contactless ones. Since then, it has gone much further and introduced its customers to new digital payment devices — such as wristbands, key fobs and even a sticker.

Other banks all over the world have been issuing their customers with contactless payment cards for some years now. HSBC started replacing old, expired cards with new contactless ones in mid-2014. Other banks, such as the Royal Bank of Scotland, are following HSBC's example. Scandinavian banks, including Nordea and SEB, are also introducing contactless payment cards.