Contactless payment

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Contactless payment is a secure method for consumers to purchase products or services via debit card, credit card, smartcard (also known as chip card), or other devices, including smartphones and other mobile devices, by using radio-frequency identification (RFID) technology or near-field communication (NFC). To make a contactless payment, the consumer holds their card or device near a point-of-sale terminal equipped with the appropriate technology.

History

The concept of contactless payment was first introduced in the 1990s. The first significant deployment of contactless payment systems was in South Korea in 1995, followed by the United States in 1997. The technology gained widespread adoption in the 2000s, particularly with the introduction of EMV (Europay, MasterCard, and Visa) standards, which enhanced the security of contactless transactions.

Technology

Contactless payment systems use RFID or NFC technology to communicate between the payment device and the point-of-sale terminal. The payment device contains a small chip and antenna that transmits payment information to the terminal when in close proximity. The transaction is typically completed in a few seconds, making it faster than traditional magnetic stripe card or chip and PIN transactions.

RFID

RFID technology uses electromagnetic fields to automatically identify and track tags attached to objects. In the context of contactless payments, RFID tags are embedded in payment cards or devices, allowing them to communicate with the point-of-sale terminal.

NFC

NFC is a set of communication protocols that enable two electronic devices to establish communication by bringing them within 4 cm (1.6 in) of each other. NFC is used in contactless payment systems to facilitate secure transactions between the payment device and the terminal.

Security

Contactless payments are considered secure due to several factors:

• **Encryption**: Payment information is encrypted during transmission, making it difficult for unauthorized parties to intercept and use the data.
• **Tokenization**: Many contactless payment systems use tokenization, which replaces sensitive payment information with a unique identifier (token) that cannot be used outside the specific transaction.
• **Limited Range**: The short range of NFC technology (typically a few centimeters) reduces the risk of interception by unauthorized devices.

Advantages

• **Speed and Convenience**: Contactless payments are faster than traditional payment methods, reducing transaction times and improving customer experience.
• **Hygiene**: Contactless payments reduce the need for physical contact with payment terminals, which can be beneficial for hygiene, especially during health crises like the COVID-19 pandemic.
• **Security**: Enhanced security features such as encryption and tokenization make contactless payments more secure than traditional magnetic stripe transactions.

Disadvantages

• **Acceptance**: Not all merchants accept contactless payments, although acceptance is growing.
• **Transaction Limits**: Some regions impose limits on the amount that can be spent in a single contactless transaction, requiring a PIN or signature for higher amounts.

Related Pages

• Credit card
• Debit card
• Smartcard
• Near-field communication
• Radio-frequency identification
• EMV
• Magnetic stripe card
• Chip and PIN
• COVID-19 pandemic