What are Contactless Cards and how secure are they?

Last week my dad went to a grocery store and came back home all confused! He had bought groceries worth Rs 1200 and passed on his newly-arrived Debit Card to the cashier. To his surprise, the cashier handed over the card back to him without asking for a PIN and said that the transaction was done. My dad was not only perplexed about how it happened, but also worried about the safety of the card.

Have you had a similar experience? Have you noticed the Wi-Fi like symbol on your debit or credit card and don't know what exactly it is? Here is everything you need to know about Contactless cards:

What is a Contactless Card?

We all are familiar with the EMV chip debit and credit cards that need to be swiped or dipped at/in a Point-of-Sale (POS) terminal and requires a Personal Identification Number (PIN) to complete the transaction. A contactless card is a new kind of debit or credit card that does not require swiping through a POS terminal or a PIN to execute the transaction. You simply have to tap or wave the card over the POS terminal compatible with contactless transactions and the transaction will be executed within a few seconds.

Contactless Cards are powered by Radio Frequency Identification (RFID) or Near-Field Communication (NFC) technology. The radio waves in these technologies share your payment data, such as bank details and card details, in an encrypted format. Let me illustrate how the contactless payment works with an example:

Suppose, you have purchased items worth Rs 1500 from a merchant that accepts contactless payments, once the cashier inputs the data of all the products you have purchased, the system will ask for the payment. With a contactless card, you do not have to hand over your card to the cashier; instead, you will only tap the card near the RFID or NFC logo on a POS terminal. Your transaction will take place within a few minutes and you will receive a payment confirmation message from the financial institution that has issued the card.

Nowadays, many smartphones and smartwatches allow you to securely store your debit or credit card details in their apps. For example, Apple Pay allows its users from specific countries to use this stored information to make payments by tapping an iPhone or iWatch.

How safe is the Contactless Card?

While using a contactless card is a faster and more convenient way of payment, the question of its safety and security can be a concern for many people. Here are the points that can answer your safety and security concerns regarding Contactless Cards:

1. The contactless cards have an embedded chip that emits radio waves. When you tap or wave your card near a POS terminal that is compatible with contactless payments, it transfers the required information in an encrypted format. Therefore, it is not possible for anyone to read the information even if they get the information.

2. Just like EMV chip cards, contactless cards, too, have multiple security levels that help in real-time fraud detection.

3. The radio waves that a contactless card emits are very short-range. You have to place the card at least 4 centimetres close to the POS terminal for a transaction to take place.

4. You do not have to hand the card over to the cashier to make the payment, unlike EMV chip cards. The hackers usually create duplicate magnetic strips to steal the data when you swipe or insert your card in the POS terminal, which is not possible to do in case of contactless cards.

5. The POS terminals are deployed only to KYC-compliant merchants. Therefore, if your card is misused, the fraudulent transaction and the POS terminal can be easily identified.

6. As of now, the Reserve Bank of India (RBI) has set the limit on the contactless payment amount of Rs 5,000 per transaction. Therefore, the transaction above Rs 5,000 still needs the card to be swiped or dipped into a POS terminal and requires a customer to enter the PIN.

7. If your contactless card is stolen or lost, you simply need to inform the card issuer. Your card will be blocked immediately and no transaction can take place after that.

8. The user need not worry about loss of money through fraudulent transactions since the financial institutions offer Zero-Liability cover against such transactions done through contactless cards.

What are the Benefits of Contactless Cards?

Contactless cards have many benefits over EMV chip-based cards. Some of them have been explained below:

1. Fast and Convenient:

   Since you do not have to hand over the card, insert it into a POS terminal, and enter the PIN, it saves a lot of your time. The payment gets securely processed and executed with a single tap within a few seconds. The process of EMV chip cards is slower and it makes difference when you are standing in a long queue.

2. No Direct Contact:

   With tap-to-pay, your card remains in your control and no one else touches it. Another benefit is that, there is no surface touch involved. This feature has been beneficial during the pandemic when it is absolutely necessary to maintain social distance.

3. Security:

   As discussed, contactless debit cards and credit cards have the same multiple layers of security as EMV chip-embedded cards. Additionally, you do not have to dip the card into the POS terminal, which creates another layer of security for contactless cards.

4. Long Lasting:

   The EMV chip-based cards usually wear out after a few years with frequent use since it needs swiping and dipping. Whereas, contactless cards are comparatively long-lasting as they need less handling.

Does Contactless Cards have any disadvantages?

Like any other technology, contactless cards also have some disadvantages:

1. The transaction limit of Rs 5,000 is set by the RBI, and cannot be changed as per customer requirements.

2. Many leading banks are issuing Contactless Cards for any new issuance of debit or credit cards and for replacement of expired cards. So, when you request for issuance of your debit or credit card, you will receive a contactless debit or credit card by default, even if you do not want one.

3. With ease to spend, people are more likely to use the card that often, which can increase their expenses.

4. Although contactless cards are more secure, they are more exposed than EMV chip-based cards, which can concern those who are not typically tech-friendly.

Final Note:

The Contactless debit cards and credit cards are the most secure, faster, and convenient cards available. Many developed countries have already adapted contactless payments and they have introduced facilities like increasing or decreasing the transaction limits as per requirement, setting the PIN for higher amount transactions, etc.

Contactless payment is the future and we all need to adapt as soon as possible. Ensure you take the necessary precautions while using contactless cards to avoid any future concerns and inform the credit card issuer immediately in case of loss of the card.

Warm Regards,
Ketki Jadhav
Content Writer

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