Some Contactless Cards Still Suffering From Teething Problems
Proponents of contactless cards point to the opportunity for shorter, faster checkout lines and claim retailers with contactless card readers at point of sale terminals attract and retain more customers. However, issues and possible misunderstandings surround the technology.
Technovelgy and one Forbes correspondent identified temptations to increase spending as the downside of American contactless payment cards. Customers in Britain are more worried about inadvertent increased spending.
In a 2006 paper, soon after the cards were launched, Smart Card Alliance applauded increased spending, asserting neither temptation nor security were issues. Security features protect consumer and transaction information, offering advantages such as greater control and convenience for customers alongside higher throughput and lower costs for retailers, they said.
However, some customers at British retailer Marks & Spencer (M&S) have recently experienced duplicated purchases when contactless cards were too close to PIN cards. According to BBC’s Money Box, several people who inserted chip-and-PIN cards received receipts for contactless cards a foot or more away. Using near field communication (NFC), machines are not supposed to read cards beyond 2 inches (5 cm). Some fear that more people have been double-charged and have not noticed. Research shows that cards can be read through material (e.g., purses) although they allegedly have to be presented to the terminal.
Visa Europe provides M&S’s technology and told Money Box that the incidents were "extremely unusual" but it was investigating concerns. American Express claims proximity doesn’t result in accidental charges as customers have to hold cards directly in front of readers at precisely the right time for more than half a second. Randy Vanderhoof, Smart Card Alliance’s Executive Director, assured RetailWire nothing similar has been reported as happening in the U.S.
Of 31 million+ contactless cards in the UK, almost 20 million come from Barclays or Barclaycard. Take-up has been slow, partly because of inaction from banks and retailers, but when price comparison site Gocompare.com surveyed 2000 adults in March, only six percent had made contactless payments with their card. The Guardian reports Gocompare found large numbers "wary of new payment technologies." One in four described the idea of contactless payments as "scary."
- Contactless credit card disadvantages – Technovelgy
- Contactless cards hit shoppers with phantom charges: string of complaints after customers paid for items when plastic was in their pockets – Daily Mail
- Contactless “charging errors” at Marks & Spencer – BBC
- Contactless payments: which banks are in touch – Guardian
- Contactless cards: how safe is your money? – Guardian
- Contactless payments reach “watershed moment” – Visa Europe
- The What, Who and Why of Contactless Payments – Smart Card Alliance
- Contactless payments – bad news for consumers? – Forbes
- Why contactless cards can leave you with a losing deal – Guardian
- Sifting the facts from the fiction about contactless cards – Guardian
Discussion Questions
Could problems with contactless cards be urban myths? Are retailers and banks encouragoing consumers to use still unproven technology? How worried do you think consumers are about having their cards stolen and used without PIN or signature protection?
Technical hiccups aside, I’m fairly certain that PIN-free contactless payments will become quite routine for small purchases.
Europe, as usual, is a bit ahead of the U.S. on adoption, so consumers there are discovering the issues sooner. Double payments on the same transaction are not acceptable, and POS systems should and can be programmed to detect and prevent this.
The issue of pass-by theft of card information strikes me as a bit of fear-mongering. Yes, it may be possible with sophisticated gear, but NFC has a very short range by design, and stealing a card number that’s only good for up to $25 at Starbucks seems like a slim motivation for larceny.
Contactless payments are already migrating onto mobile devices. This means many users will leapfrog the NFC card step. Google Wallet, ISIS, and the MCX consortium of U.S. retailers will campaign hard to drive consumer acceptance. Privacy advocates will scream, but the juggernaut is already in motion.
The issue in this technology is plausible deniability. What retailers are dealing with is the ability for a person or company to report misuse and/or abuse without acknowledgment or acceptance steps being included with all or any part of each transaction. Outside of the USA consumers are held more accountable for the use of their credit/debit payments methods. Therefor, these issues are resolved as a part of the ownership of the card and or device and thus a user’s own security responsibility.
Video observation will offer retailers the ability to demonstrate acceptance/authorization for the transaction, but needs work in terms of this technology’s inherent deficiencies and dependability. Time is the solution here. As retailers upgrade and video/audio observation at point of sale technologies improve in accuracy and dependability the acceptance and use of these payment methods will expand to ease checkout times.
Contactless card technology in the form of “chip and PIN” is a proven and safe technology for consumers. To sow the seeds of fear and doubt based on “bad reads” is nearly irresponsible with all the research previously completed.
The problem with contactless acceptance and roll out is more the value that the cards represent for consumers. After fraud, the business case for these cards was made on speed and convenience, but that is not enough to urge people to experiment with a new modality of payment.
Further, if all cards were to become “tap” versus “swipe,” what advantage would it bring one bank over another? As long as mag stripe works so well in the US, other forms of payment will find slow adoption by consumers.
Only the threat of card fraud in the US, a very real threat, will accelerate adoption of chip and PIN.