Do you know what a contactless payment system is? Until recently, credit cards have always been a contact sport, albeit less violent than your typical football or hockey game. Long ago, you presented your credit card and an imprint was made on carbon paper. Later, terminals were deployed that could read your card's information from its magnetic stripe. And more recently, credit cards have been issued with embedded microchips that offer a more secure way of transmitting data to the merchant.
From Contact to Contactless
Nevertheless, all of these payment methods are referred to as contact payment systems, as they have to physically touch the retailer's systems. Now, a new generation of so-called contactless payment systems are emerging that no longer require a credit card to contact anything. For most Americans, Apple Pay may be the most familiar contactless payment system, which first used an iPhone version 6 or above.
Later, Apple introduced its Apple Watch, which also allowed contactless payments and became one of the first so-called wearable systems. According to Juniper Research, nearly 9 million Apple Watches had been shipped by the end of 2015, but there were far more Apple Pay compatible iPhones sold. As a result, it said that mobile and wearables could account for over $100 billion in transactions by 2018.
Other Forms of Contactless Payment Systems
Beyond smartphones and their accompanying watches, there are several other ways to implement contactless payment systems that should be available soon. Examples include bracelets, wristbands, and cards embedded with Near Field Technology (NFC) or Radio Frequency Identification (RFID) systems. For instance, this technology is already in use at many ski resorts, cruise lines, and theme parks that issue customers an ID card that can be linked to their credit card in some way. Guests are then able to make charges at vendors throughout the property or on-board the cruise ship. In addition, many public transit systems also issue cards that enable contactless payments.
The credit card industry is working to create a similar system that could bring this kind of contactless payments to retailers outside of the controlled setting of that of a resort or cruise ship. And in addition to phones, cards, watches, and other types of wristbands, you could see contactless devices on your key chain or even embedded in your clothing. Barclaycard of England offers its bPay system in the United Kingdom for purchases of 20 GPB or less, and its offered in multiple forms, including embedded in the sleeves of jackets and other clothing. It's only a matter of time before this technology crosses the Atlantic.
What About Security?
Today, there's no greater concern than security when rolling out one of these new contactless payment systems. Thankfully, these systems are using encryption to protect your credit card information and Barclaycard's bPay system claims to be as secure as the smart chip contact payment systems. And while criminals will always find some way to hack these next generation payment systems, American credit card users continue to be protected by the Fair Credit Billing Act of 1974, which protects them from being liable for more than $50 in the event of a fraudulent transaction. And in practice, credit card issuers waive this amount by offering zero liability policies.
By continuously rolling out new contactless payment systems, credit cards are becoming even more secure and convenient than ever before.
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