How Safe Are Contactless Payments?
What Are Contactless Payments, and How Are They Used?
Credit cards have evolved constantly since their inception. We’re always looking for quicker transactions, more convenience, and easier to handle processing power. As a result of our desire for a streamlined and customized experience, contactless payments were born in 2015 from a desire to make transactions faster, easier and, frankly, cooler. Even now, Apple is moving to turn iPhones into payment terminals.
Contactless payments are those that don’t require consumers to either hand over a card or touch a payment terminal. Mobile payments are a big part of that, such as Apple Pay. Contactless payments have been in use for many years, but they’ve only reached a popular adoption apex during the COVID-19 pandemic. As contactless everything became the norm, contactless payments naturally generated a lot of interest—and controversy.
Contactless payments generally fall into three categories:
Contactless payment cards
Mobile contactless payments
Payment by code
While many other contactless payment options exist, such as ordering online or over the phone, contactless here means store-centered purchases that require no contact when checking out. The benefits are obvious: reducing the spread of germs, working transactions faster, not having to hold a card with a chip in the reader for an extended period of time (or having the chip not work and having to swipe it anyway). Customers prefer convenience, and contactless delivers that.
Various types of mobile contactless payment exist for a variety of uses, all running on near-field (NFC) communication sensors or radio-frequency identification (RFID). Mobile wallets, such as Apple Pay and Google Pay, are famous third-party applications that store and process monetary transactions through private servers. Wearable devices offer quick payment convenience and can fit on things like a bracelet, making them fashion accessories as well. Scannable codes, such as QR codes, have become very popular during the pandemic not only for payments but for things like menus and other items that could be better accessed via digital device.
Contactless cards typically come with an EMV chip and the usual card features, such as the magnetic stripe, security code, and expiration date. You can usually tell if a card is contactless-enabled by a symbol with wavy lines that closely resembles the Wi-Fi symbol on the back of the card.
There is a concern among consumers that contactless payments are less secure, or more prone to hacking. While hacking and data theft are always valid concerns, the nature of the technology underpinning contactless payments makes them highly secure. The chip in the card requires a point-of-sale device that can intercept and decipher the data, and it must be very close to a registered merchant account reader to work (within two centimeters). In other words, it takes a lot to hack and read data and make it usable from a contactless payment system. While not impossible, it also isn’t less secure or trustworthy than conventional credit card payment systems.
Of course, there are some technological hurdles to contactless payment systems. There can be card reader issues between the device and the processor. Not every device is interoperable with every card or wallet. Picking cards and payment types for different stores can place hurdles on consumers, many of whom do not possess multiple modes of payment for simple transactions. Consideration has to be made for buyers with lean payment systems and smaller merchants with limited forms of payment processing and technical acumen.
The Future of Payments and Customer Convenience?
If the dream of the customer of the future is the extinction of lines and waiting, what is the best way to achieve that? How do we bring about a seamless customer experience that is secure, trustworthy, and highly convenient for everyone? What requires the lowest barrier to entry to adequately implement? And how can we protect ourselves during pandemic times when we need to make purchases but have to limit exposure?
All of these questions are answered by contactless payments. Numerous systems, such as subways and travel terminals, already offer such contactless NFC methods of payment and processing. As our technology evolves, we expect our waiting to be reduced, our transactions to be faster, and our abilities to process information to grow exponentially while we live our lives with the tech in the background.
There are still potential qualms to the technology. Google Pay and Apple Pay, for example, are still payments processed and stored by third parties, both of whom have had issues with privacy and consumer data sharing agreements in the past. Many people might have a distaste for handing over their information to these organizations out of history or philosophy, and struggle to trust monolithic companies. While these are valid concerns, the nature of the payment industry means that numerous players enter and exit the market all the time. Credit card companies have had PCI and other data containment issues themselves in the past, making them no more or less risky than the new tech players in the space. If consumer trust is the most valuable commodity, it’ll be built by consistent network effects and positive consumer benefits from using the new services and proving its viability.
It’s likely even in the post-pandemic world that contactless payments will remain popular. Despite the occasional frustrations that can emerge from incompatible devices or systems, the network gets more and more robust practically daily. In the early days of Apple Pay, many vendors did not take the payment form at all. But over time, the company has made steady inroads into the contactless world and now is an industry leader and a pioneer in making these types of transactions both possible and fashionable. What starts slow can build quickly and truly take off during surprise events, such as the pandemic.
For those truly uncomfortable with the idea of their data being unsecured or able to be stolen, cash is the safest alternative. There is no such thing as a pure, 100% safe payment system in the modern world, but cash is as close as we get. But contactless payments remain popular and widely used because they’ve proven to be effective and simple with a minimum of intrusion or data issues. While security problems sometimes arise, the systems are always being refined to not only work better with new devices but to be safer on legacy ones, too.
It’s obvious in our modern world that contactless payment systems will remain active. They’ll likely become more and more popular. As a secure, safe processing method, contactless ranks well with the others we’ve come to rely on. The future remains to be seen, but it’s almost certainly bright.