10 Things to Know About Contactless Technology
Contactless technology has been used for more than 20 years to help us to conduct transactions quickly, easily and securely. Contactless is not only here to stay – it is expected to grow and become even more widely used in the coming years. In this focus article, the JustAskGemalto team lays out the top 10 things you need to know about contactless technology and how it can benefit you.
1. Contactless technology is smart card technology.
Contactless technology is the shorthand way to refer to contactless smart card technology. Contactless smart cards contain small but sophisticated computers and communicate with card readers wirelessly via short-range radio frequency. A contactless smart card is capable of delivering the highest levels of computer security to protect your identity, privacy and/or financial information.
2. Contactless technology is widely in use.
Tens of millions of people use contactless technology every day—in bank payment cards, passports, identity cards, and transit fare cards for secure, fast, convenient transactions.
Some example applications using contactless smart card technology include:
➢ The U.S. ePassport being issued by the Department of State
➢ Contactless payment cards and devices being issued by American Express, MasterCard and Visa
➢ Contactless transit fare payment systems currently operating or being installed in such cities as Washington, D.C., Chicago, Boston, Atlanta, San Francisco and Los Angeles.
➢ The U.S. FIPS 201 Personal Identity Verification (PIV) card being issued by all federal agencies for employees and contractors
➢ The Transportation Worker Identification Credential (TWIC)
➢ The First Responder Authentication Card (FRAC)
3. Contactless transactions can only be made when you are very close to a reader.
A contactless smart card can only be read when placed four inches or less from a reader. This means you need to make a deliberate effort for your card to be read – and you won’t unknowingly use your card.
4. Contactless payments are more secure than traditional magnetic stripe payments.
Contactless payments use encryption, and dynamic card verification to prevent cloning and counterfeit cards. During every contactless payment transaction, the computer inside of the card generates a dynamic code that is communicated to the payment terminal. The issuer then validates this unique code and approves the transaction from an authorized reader. This information cannot be used more than one time. So, if thieves somehow obtained your card information and created a counterfeit card with the stolen data, they will not be able to generate dynamic codes and the transaction will be rejected.
5. Paying with a contactless payment card is faster than traditional payment methods.
Many card issuers have reported that contactless payment cards make the payment experience much quicker. Chase, for example, reported customer time at the point-of-sale (POS) is reduced by 30 to 40 percent. American Express has reported that contactless transactions are 63 percent faster than cash and 53 percent faster than using a traditional credit card. MasterCard found good results in drive-through payment environments – 12 to 18 seconds faster than using cash.
6. EMV chip card technology will likely make contactless payments more widespread.
The United States is migrating to secure EMV chip technology. The U.S. payment brands Visa, MasterCard, American Express, and Discover have introduced roadmaps for moving the U.S. to EMV chip cards. This means all of our payment cards – contact and contactless – will contain secure smart card technology. Many analysts see this change to the U.S. payments infrastructure as a catalyst for contactless payment growth: Card issuers have the option to issue dual interface contact and contactless EMV payment cards, while merchants can upgrade their POS terminals to accept both contact and contactless payments.
7. Contactless payment point-of-sale terminals are readily available.
ABI Research has forecasted that 85 percent of point-of-sale (POS) terminals that ship worldwide in 2016 will be “contactless-enabled,” and capable of accepting contactless payments. With regards to the cost to upgrade payment terminals, they vary greatly between model and supplier but it is agreed that the overall cost of payment and POS devices have been going down.
8. Contactless payment cards can be put in your mobile device with Near Field Communications (NFC)
NFC-enabled mobile phones incorporate smart chips (called secure elements) that allow phones to securely store the payment application and consumer account information and to use the information as a contactless “virtual payment card.” These contactless mobile payments can be accepted at all of the same locations as contactless payment cards. This is because NFC payments and contactless credit and debit cards all use the same standard, ISO/IEC 14443, for communication.
9. Contactless payments are not just for retail.
The transportation industry has been a big adopter of contactless smart card technology for fast, efficient and secure transit payments. In many cases, a “closed loop” contactless smart transit card is issued by a transit operator. This is a contactless fare card dedicated to paying for travel on that specific transit operator’s subways, buses and trains. A rider simply holds the contactless fare card close to a reader and then can quickly board mass transit. Smart transit cards provide many benefits to transit agencies as well as riders, including quicker fare payments, convenience and reduced reliance on paper.
10. Contactless transit cards and contactless bank cards are converging.
Many transit operators are moving toward “open payment” or “open loop” transit payments. This enables the use of bank-issued contactless cards for direct transit fare payments without a separate transit fare card. This also paves the way for direct transit fare payments using mobile phones with NFC because NFC uses the same standard as open contactless payments.
In reading this list, were you surprised to find out that you are probably already using contactless technology today? If so, what is your favorite application of the technology? Let us know in the comments!