posted on 12-05-2019

Contactless Payment

Updated December 5, 2019

What Is Contactless Payment? 

Contactless payment technology allows transactions through a chip embedded in payment cards, tags, key fobs, or mobile phones. A chip or QR code communicates with a reader device using radio frequency or Near Field Communication (NFC) standards.

It includes radio frequency identification (RFID) as part of a machine-to-machine information transfer. It’s the same technology that powers Easy Pass on the freeway, but is instead linked to your bank account or credit card account.

How Contactless Payment Works

To pay for something with contactless payment, you hold the card or your mobile phone near a payment terminal (the RFID reader), which picks up the signal and then communicates with the card on file to processes the payment.

Contactless Payment Examples 

Some examples of contactless payment that use Near Field Communication are: Samsung Pay, Apple Pay, Google Pay, Fitbit Pay, or any bank mobile application that supports contactless payment. 

Criticism of Contactless Payment 

As with any new technology that involves banking, there are risks involved. Some risks that you are able to manage include the convenience and ease of spending. When you can tap a card without much thought, rideshare journeys, coffee, and other small purchases can soon build to a big spend over the course of a month. 

From a transactional standpoint, consumers must trust that the data they provide over an NFC network will not be compromised or shared with inappropriate third parties. A complex breach of privacy may include hijacking card information at point-of-sale and using it forge counterfeit cards, make online purchases, or even sell data to hackers. 

History of Contactless Payment

ExxonMobil was one of the most notable early adopters of similar technology that offered a "Speedpass" contactless payment system for participating Mobil gas stations as early as 1997. Google (2011) and Apple (2014) have introduced contactless payment systems, as have major banks in the U.S.

However, compared to the rest of the world, the U.S. has been slow to adopt this technology, primarily because the market is much more fragmented and because of consumers’ security concerns.

Recent statements by Visa and other U.S. card issuers indicate that they will increase the availability of contactless cards to U.S. consumers in the near future. Visa estimates there will be 300 million contactless cards issued in the U.S. by the end of 2020.