Contactless Payment Pp

Contactless Payment

© Family Economics & Financial Education – January 2007 –– Financial Institution Unit – Contactless PaymentFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

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What is Contactless payment?

The latest implementation of wireless payment A device with a tiny chip and antenna

embedded in it Communicates through radio frequencies (RF) Devices include:

Plastic cards Watches Key fobs Money clips Cell phones


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How DO They Work? Tap and Go technology

Customer must hold the device in front of a sensor, usually on a Point of Sale (POS) terminal Smart chip and antenna in the device transmits

a unique code to the sensor After the transaction is complete, the consumer

either hears a beep or sees a flashing light The transaction goes through the sponsoring

networks (MasterCard, American Express, Visa) system to be cleared and settled

If the purchase more than $25, a signature or PIN may be required


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Companies Using Them

First issued by Exxon Mobile in 1997 “Speedpass” is used at gas pumps Still used today

Today American Express – ExpressPay MasterCard – Paypass Visa – Visa Contactless


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Growth

Since 2005, millions of contactless payment devices have been distributed The rate of deployment is the highest

ever observed for emerging payment products


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What are the Benefits? Issuer

American Express, MasterCard, Visa Consumer

Individual making the purchase Merchant

Store

Brainstorm two benefits for each group


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Issuer Benefits

Issuer Contactless payments have:

Increased credit and debit card transactions Decreased cash transactions Improved customer retention and loyalty Provided co-branding opportunities Provided new service opportunities


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Consumer Benefits Consumer

Faster check out times and less waiting in line

Convenience of not carrying cash Easier to use – no PIN or signature

required if under $25 Improved security – consumer is in control

of the device at all times Better record keeping with monthly

statements compared to cash


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Merchant Benefits Merchant

Increased customer loyalty and satisfaction with the store experience

Reduced time at the cash register Improved operational efficiency – less cash

handling Increased revenue from increased

consumer spending per transaction Decreases concern of counterfeit money

or insufficient fund checks


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Availability Over 35,000 merchant locations are enabling

their POS systems to accept contactless payment 7-Eleven, Inc. Jack in the Box McDonald’s Regal (Theatres) Entertainment Group Walgreens Ritz Camera Subway Cold Stone Creamery


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New Technology New York City

Using contactless payment for direct access on the NYC transit system

Giant Stadium In September 2006, the first 5,000 fans to

enter the stadium were given wrist bands with $25 electronically loaded on them for use at concession stands

Atlanta, GA and Dallas, TX Several companies are teaming up to test

contactless payment in cellular phones


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Future Predictions?

How will contactless payment or other technologies advance in the years to come?

Brainstorm three possibilities with your group.

Share responses.


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Safety

Contactless payment as implemented by American Express, Master Card and Visa is secure Older forms with radio frequency

identification (RDIF) do not have the same safety features

Devices can be read from a few inches to a few feet away increasing the risk of fraudulent use


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Safety American Express, MasterCard and Visa

contactless payment devices include: Unique codes that change for each transaction

Payment networks can detect and reject any attempt to use the same code more than once

Therefore, if a fraudster should “read” information from a contactless transaction, the information would be useless

The customer’s name is not exchanged between the device and the terminal Some smart chips in the devices do not even hold

the customer’s name, therefore ID theft is more difficult


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Safety Some payment devices do not include the

cardholder’s account number They use an alternate number that is not used in

any other transactions, therefore ID theft is more difficult

Transactions are completed solely by the customer The device is never handed over to a store clerk,

therefore personal information is kept more secure Smart chips only send signals a short distance,

2-4 inches The customer needs to make a deliberate effort to

initiate the payment transactions


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Protecting one’s Identity As with all forms of electronic

payment, it is important to following the following safety precautions Do not leave contactless payment devices

lying around home or school Close unused accounts in writing and by

phone, then dispose of the device Check financial institution statements and

credit report to ensure all charges are legitimate


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Protecting one’s identity If a contactless payment device is lost or

stolen, report it to the sponsoring financial institution immediately $50 liability Zero Liability

Keep financial institution statements and other documents with personal information in a secure location Prevent a thief from securing a contactless

payment device under false pretenses


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Summary

Contactless payment – new payment method

Benefits for issuers, consumers and merchants

Safety features Protecting ones identity