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Contactless Payment History, Advantages, and Examples
Contactless Payment History, Advantages, and Examples
This payment method works by tapping a payment card or other device near a
point-of-sale terminal equipped with contactless payment technology.
Contactless payment is also referred to as tap-and-go or tap by some banks and
retailers.
KEY TAKEAWAYS
Contactless payment is a secure payment method using a debit or
credit card, smartcard, or another payment device by using RFID
technology and near-field communication.
To use the system, a consumer taps the payment card near a point-of-
sale terminal equipped with the technology.
Contactless payment is considered a quick and easy way to pay since it
doesn't require consumers to input a PIN.
Popular in Australia, Canada, South Korea, and the United Kingdom,
contactless payment has yet to make significant traction with American
consumers.
Here's how it works. When the merchant's system prompts the customer to pay,
they bring the card between close to the contactless payment symbol on the
terminal. Information is transmitted electronically using information from the
chip from the card to the bank. When the system accepts the tap, it signals the
customer with a beep, green light, or checkmark. Once the approval is received,
the transaction is complete.
With the rise in wireless technology and the popularity of smart devices,
consumers can also connect their credit cards to a device—a smartphone,
smartwatch, or fitness tracker—to pay using the contactless system as well. This
is done by downloading a payment app such as Apple Pay, allowing consumers
to securely store credit and debit card information to make purchases by
tapping a smartphone or Apple iWatch.
In most cases, transaction sizes on cards are limited for contactless payment.
The allowable amount for a contactless transaction varies by country and by
the bank. Some merchants and retailers may set a low limit for their tap system
in order to further prevent fraud, while others still allow large transactions to go
through. Large dollar amounts may require a signature before they can be
approved.
Despite these security features, criminals are still able to skim cards in
consumers' wallets using smartphones to read. The range at which a card can
be read is very short and, even if the thief is close enough to grab data, they
can't create a copy of the card. This is not true of cards with magnetic stripes.
That said, chip and PIN cards are still the most secure, as they can't be
duplicated and require data not contained anywhere else on the card.
South Korea's transit authority in Seoul offered one of the world's first
contactless payment systems. Launched in 1995, the system later became
known as UPass, offering riders a quick and easy way to pay for bus trips using
the contactless system. [ 2 ] Mobil offered one of the first contactless payment
systems called Speedpass in 1997, allowing customers to pay for gas using a
special fob loaded with cash at participating gas stations. [ 3 ]
The contactless system became popular in the United Kingdom after London's
transit agency implemented its prepaid contactless Oyster Card system for
transit riders to use on the Underground. [ 4 ] In 2014, the agency started offering
commuters the option to use contactless credit and debit cards to use on the
transit system. [ 5 ]
The U.S. market has been considerably slow to adopt contactless payment.
Roughly 20% of the transactions that take place in Australia, Canada, South
Korea, and the United Kingdom are conducted using contactless payment
methods, according to a 2018 report from consultancy firm A.T. Kearney.
Americans still use physical cash more than payment cards, to the tune of
almost 50 billion cash transactions each year, or 26% of all consumer payment
transactions, according to the report. Because of the volume of retailers and
banks, the American market is more fragmented. [ 6 ]
Tip: Treat a digital wallet the same way you would cash—use the
locks on your device and set up notifications on all your credit cards
in case of fraud or theft.
Apple Pay
Most Apple devices already come equipped with the Apple Wallet app. It allows
users to store credit and debit card information onto their device—notably an
iPhone or iWatch—to make purchases in stores. The system also allows
purchases to be made online and through other apps. Users can also send
money to friends and family through their text message system using Apple Pay.
[ ]
9
Google Pay
Google allows users to make payments at participating brick-and-mortar and
online retailers through a secure method via the Google Pay app. Instead of
using a credit card number, Google shares an encrypted number tied to the
user's payment card with the retailer. Just like Apple Pay, users can also send
and receive money by using an email address or phone number. [ 10 ]
Samsung Pay
Samsung also launched a digital wallet, allowing users to store their payment
card information onto the app to use at merchant terminals. Samsung Pay
users can also earn cashback and other rewards by using their phones to make
purchases. Users simply take a photo of their card or of a barcode and tap to
check out. [ 11 ]
Most vendors are now accepting contactless payments. Simply look for the
contactless symbol (four curved lines) on the vendor's POS terminal.
ARTICLE SOURCES
Related Terms
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A mobile wallet is an app that stores payment card information and other on a mobile
device. more
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