What are the Main Technologies behind Contactless Payments?

contactless payments

This year has been a seminal one for the financial services sector, particularly in terms of how consumers pay for goods and services.

British customers made a total of 13.2 billion debit card transactions in 2017, compared with just 13.1 billion cash payments. Overall, the annual volume of cash transactions has fallen by 15% year-on-year, with the emergence of contactless payments having a significant bearing on this.

But what are the key technologies that underpin contactless payments? Let’s take a look:

EMV Technology – A Key Staple of Credit Cards

EMV stands for Europay, Mater and Visa, and is featured in every modern credit and debit card. It’s also crucial to the security of contactless payments and firmly established as an open-standard set of specifications for all cards equipped with computer chips.

In fact, every contemporary credit and debit card is installed with an EMV chip card, providing improved security and finer control of all offline credit card approvals.

To achieve this, it utilizes dynamic, single-use data that is generated for each individual transaction, making it almost impossible for cyber-thieves to clone information from magnetic cards.

EMV is extremely well-established and universally popular with banks, merchants, and vendors from across the globe dependant on this when accepting secure payments from multiple sources.

This has been borne out by the figures, with Canada having seen debit card fraud decline from $142 million in 2009 to just $38.5 million in 2012. The country only adopted EMV in 2007, and this trend has been repeated across a number of developed economies.

Introducing NFC Technology

Contactless transactions also include payments made through your smartphone, whether you own an iPhone and use Apple Pay or have an Android handset and access to a Google Wallet.

Mobile payments are powered by NFC (near field communication) technology, which has benefited from considerable innovation in recent times. It allows your smartphone to create a radio frequency identification (RFID) that can communicate and share data with another NFC-equipped device, such as a contactless payment terminal.

In some respects, this technology is limited as NFC-equipped devices can only communicate if they are four inches apart or less. However, this restriction actually makes mobile payments more secure, as the minimal distance creates a challenge for hackers who wish to steal your data.

While NFC is not a new technology, it has seen exponential growth since the release of the very first smartphone (the Ericsson R380) in 2000. Virtually every OS maker has their own apps that offer unique NFC functionality in 2018, with the result being that the global mobile payment volume is expected to reach $92 billion by 2019.

The Last Word

The financial services sector has benefited from considerable innovation during the last decade, from the diversification of payment methods to the emergence of new and innovative loan products.

However, the rise of contactless payment solutions is one of the most significant developments to date, and one that has changed how we spend our hard-earned money.



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