Contactless payment systems are credit cards and debit cards, key fobs, smart cards or other devices, including smartphones and other mobile devices, that use radio-frequency identification (RFID), near field communication (NFC), or Samsung Pay (MST) for making secure payments. The embedded chip and antenna enable consumers to wave their card, fob, or handheld device over a reader at the point of sale terminal. Contactless payments are made in close physical proximity; they are usually distinguished from mobile payments which can also take place on mobile phones, but mobile payments use broad-area cellular or WiFi networks and do not involve close physical proximity.
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Some suppliers claim that transactions can be almost twice as fast as a conventional cash, credit, or debit card purchase. Because no signature or PIN verification is typically required, contactless purchases are typically limited to small value sales. Lack of authentication provides a window during which fraudulent purchases can be made.
Research indicates that consumers are likely to spend more money using their cards due to the ease of small transactions. MasterCard Canada says it has seen "about 25 percent" higher spending by users of its Mastercard Contactless-brand RFID credit cards.
EMV is a common standard used by major credit card and smartphone companies for use in general commerce. Contactless smart cards that function as stored-value cards are becoming popular for use as transit system farecards, such as the Oyster card or RioCard. These can often store non-currency value (such as monthly passes) in additional to fare value purchased with cash or electronic payment.
History
Mobil was one of the most notable early adopters of this technology, and offered their "Speedpass" contactless payment system for participating Mobil gas stations as early as 1997. Although Mobil has since merged with Exxon, the service is still offered at many of ExxonMobil's stations. Freedompay also had early wins in the contactless space with Bank of America and McDonald's
McDonald's, KFC, Burger King, Boots, Eat, Heron Foods, Pret a Manger, Stagecoach Group, Subway, AMT Coffee, Tesco, Asda and Lidl are among the retailers offering contactless payments to their customers in the UK. In March 2008, EAT. became the first restaurant chain to adopt contactless.
Major financial entities now offering contactless payment systems include MasterCard, Citibank, JPMorgan Chase, American Express, KeyBank, Barclays, Barclaycard, HSBC, Lloyds Banking Group, Freedompay, The Co-operative Bank, Nationwide Building Society and The Royal Bank of Scotland Group. Visa payWave, American Express Expresspay, and MasterCard Contactless are examples of contactless credit cards which have become widespread in U.S. and UK. The UK (and the rest of the world) version of the contactless applications differ from the U.S. one. The UK version has the capability of transacting offline, based on the limit stored in the application.
The first contactless cards in the UK were issued by Barclaycard in 2007. As of December 2014. There are approximately 58 million contactless-enabled cards in use, in the UK, and over 147,000 terminals in use though this is growing in numbers and percentages of adoption.
Telecom operators are starting to get involved in contactless payments via the use of near field communication phones. Belgacom's Pingping - Belgium, for example, has a stored value account and via a partnership with Alcatel-Lucent's touchatag provides contactless payment functionalities. In January 2010, Barclaycard partnered with mobile phone firm Orange, to launch a contactless credit card in the UK. Orange and Barclaycard also announced in 2009 that they will be launching a mobile phone with contactless technology.
In October 2011, the first mobile phones with MasterCard PayPass and/or Visa payWave certification appeared. A PayPass or payWave account can be assigned to the embedded secure element and/or SIM card within the phones. Android Pay is an application for devices running Google's Android OS, which allows users to make purchases using NFC, which initially required a physical secure element but this was replaced by host card emulation which was introduced in Android 4.4 (KitKat). Softcard (formerly known as Isis mobile wallet), Cityzi and Quick Tap wallets for example, use a secure SIM card to store encrypted personal information. Contactless payments with enabled mobile phones still occur on a small scale, but every month an increasing number of mobile phones are certified.
In February 2014, MasterCard announced that it would partner with Weve, which is a joint venture between EE, Telefónica UK, and Vodafone UK, to focus on mobile payments. The partnership will promote the development of "contactless mobile payment systems" by creating a universal platform in Europe for it.
In September of 2014, Transport for London's Tube began accepting contactless payment. The number of completed contactless journeys has now exceeded 300m. On Friday 18 December, the busiest single day in 2015, a record 1.24m journeys were completed by over 500k unique contactless cards.
In 2016 Erste Group launched an NFC only debit card implemented as a sticker in Austria. It can be used at any NFC supporting terminal for transactions of unlimited amount however for transactions over the floor limit of 25 EUR a PIN is required to confirm the transaction.
Security
As with all payment devices, contactless cards have a number of security features. Depending on the economic space, there may be a payment limit on single transactions, and some contactless cards can only be used a certain number of times before customers are asked for their PIN. Contactless debit and credit transactions use the same chip and PIN network as older cards and are protected by the same fraud guarantees. Where PIN is supported (e.g., not in the United States), the contactless part of the card remains non-functional until a standard chip and PIN transaction has been executed. This provides some verification that the card was delivered to the actual cardholder. To reduce the likelihood of identity theft, a contactless card does not contain the cardholder's actual name; instead, a placeholder name is used.
Under fraud guarantee standards U.S. banks are liable for any fraudulent transactions charged to the contactless cards.
Floor Limit
Because no signature or PIN verification is typically required, contactless purchases are typically limited to a set amount per transaction, known as a "Floor Limit".