Contactless cards, which make payments by just waving at a PoS terminal, are quick, convenient and secure. They entail benefits for both merchants and customers
In a recent communication to the banks, the Finance Ministry advised them to start issuing Near Field Communication (NFC) enabled contactless credit and debit cards to customers. Viewing contactless cards as an enabler of a less-cash dependent economy, the Ministry’s communication reinforces the fact that technology will aid in bringing added security and convenience for digital payments for countless Indian citizens.
But what are contactless cards? Unlike a traditional card, it works on NFC technology and lets card users make payments by a mere tap at the point-of-sales (PoS) terminal. This drastically reduces the transaction time and offers seamless purchase experience to customers. Aimed towards making small ticket purchases speedier and more convenient as also to encourage more citizens to go cashless, the Reserve Bank of India’s (RBI) guidelines have limited the amount per transaction for these cards to Rs 2,000. For a transaction exceeding the amount, customers are required to enter the PIN.
Distinguishing between a normal and contactless card is easy. The latter comes with a symbol, making it easily recognisable. The same symbol is also present on the PoS terminal, where a card user can tap to pay. The terminal accepts and processes payments when it is placed within 4 cm or closer to the card reader. Using a contactless card, too, is simple — just tap and pay! All the merchants have to do is enter the purchase amount in the PoS, following which, the customer can simply tap the card against the PoS reader to complete the transaction.
Regarding security, contactless technology is one of the most secure ways to pay at the PoS as it leverages the same dynamic security as any EMV contact chip enabled card. Every transaction includes a unique one-time passcode in place of personal account information, ensuring that the card information transmitted cannot be used to create counterfeit cards. Hence, critical information and data, including cardholder’s name and CVV code, is not shared during a transaction. Moreover, as the card does not leave the customer’s hand, there is no way for a merchant to access the information on it. Also, communication between a contactless card and a checkout terminal is only initiated if both devices are less than 4 cm apart and correctly oriented against the reader.
In case of lost or stolen card, banks usually pre-define a limited number of daily tap and pay purchases for contactless cards issued by them. This means that consumers can only conduct those many number under Rs 2,000 transactions in a day. Post that, transactions will require entering their PIN. Furthermore, security algorithms could also randomly request for authentication after every few transactions. The technology has been designed to provide the card holder a seamless payment experience.
A normal cash transaction takes around 30 seconds or more, while an EMV transaction using the swipe or chip method can often take longer owing to multiple steps involved. Opposed to these two, contactless cards provide a seamless user experience as it takes a mere three seconds or less to complete a transaction with literally a tap. This means shorter queues and even shorter wait time. This in turn also means more business for merchants, who earlier would lose customers owing to long queues. More importantly, it reduces the hassle of managing large quantities of cash and wards off the possibility of theft.
Globally, in more digitally mature markets, there has been a drastic reduction in cash usage, largely driven by contactless payment technology. A recent survey by The Guardian showed that cash usage in the UK, a country where contactless cards have witnessed widespread adoption, fell to 40 per cent in 2016, against 62 per cent in 2006. In Australia, researchers at the Reserve Bank of Australia Visa’s contactless product now accounts for nearly 94 per cent of its face-to-face card transactions. Contactless face-to-face Visa transactions have tripled in Hong Kong in the past 18 months and today, one in three face-to-face Visa transactions is made via a contactless payment. Back home in India, more than 20 million contactless cards were in circulation till October 2018. The RBI had set a deadline for all banks to upgrade the existing magnetic strip cards of their customers to EMV chip-based ones by December 31, 2018. Hence, it is a good time for customers, who have still not replaced their old cards, to request their respective banks to issue a contactless card. Payment cards providers like VISA have already rolled out pilot projects with leading Indian retailers and are rapidly improving infrastructure to ensure that customers can use their contactless cards everywhere.
(The writer is Group Country Manager, India And South Asia, Visa)