By Ralf Gladis, CEO, Computop
Contactless payments have been experiencing a steep rise over the period of the pandemic in the UK. According to data revealed by Barclaycard earlier in the year, this method of payment accounted for nearly 90 per cent of all face-to-face card transactions in 2020, not just driven by hygiene concerns, but by the increase in the contactless limit to £45. Now, the limit is set to be lifted again, this time to £100, from October 15. The move, which followed a public consultation with retailers and banks, promises to give customers even more flexibility when making their purchases.
It’s hardly surprising that consumers have adopted the ‘tap and go’ option in the UK. This method takes two or three seconds to complete, while a card payment made using a PIN can take up to 29 seconds, and even a cash payment will take 22 seconds. According to figures from UK Finance, the body that represents banks, no age group or region in the UK falls below 75 per cent usage of contactless.
But it’s the all-round convenience of tap and go that most appeals. Take travel for example. Previously customers wanting to take a bus, a train, or the Underground had to work out the fare they needed and buy the ticket at a machine, from a vendor, or from the driver (in the case of buses) before they boarded.
Now, all they need to do is hold their Near-Field-Communication (NFC)-enabled credit or debit card up to a checking reader when getting on and off whatever transport mode they are using. This automatically allocates the best fare and automates payment of the journey. The system works just as easily with a mobile phone or smartwatch, provided a card is stored.
As well as making the process quick and easy for the customer, it also reinforces data protection because both the beginning and end of the journey are transmitted anonymously. Recently news stories have focused on research that indicated unauthorised payments could be made on iPhones if people were using Apple Pay with Visa cards at public transport ticket barriers. Of course, in laboratory conditions, scientists found a way to trick the system, but a fraudster would need a POS terminal, and that would require a stringent series of legal contracts all of which would demand his or her identification. The risks are negligible.
Understanding the process
As more and more customers choose to use contactless methods of paying, it is important to understand that the process goes through a sophisticated series of steps:
- When contact is made with the customer’s chosen card or device, the system checks in the background whether the stored card is valid. If they are using transport, a back-end system will assess any journeys they take during the course of one day and calculate the best price.
- The amount of the purchase is transmitted to the Payment Service Provider (PSP), which is the interface between the retailer, transport or service provider and its bank, often referred to as an acquirer. The PSP makes sure that the cards accepted by the service provider are connected to the payment system and transmits the payment amount to the acquirer.
- The bank of the retailer, transport or service provider transmits the payment to the customer’s bank, the so-called issuer.
- The issuer authorises the payment and the amount is debited from the customer’s account.
Tap and go, without the tap
Looking ahead, customers might not even need to tap a reader. Tests are being conducted to use Bluetooth for contactless payment on public transport. This would require passengers to open the app of the transport provider. When they board the bus or train, a connection is established between the passenger’s terminal device and the Bluetooth transmitter on the vehicle.
At the same time, trials of cards that use integrated fingerprint readers are also ongoing. These allow consumers to authorise payments with a touch of their finger on a sensor, in much the same way that smartphone security works. If these tests are successful, we can expect even simpler connections between contactless payment procedures and a host of circumstances where contactless payment currently requires tapping a terminal.
Contactless brings additional bonuses in some sectors. Retailers have the option for customers to make contactless payment through a proprietary app which also gives them the opportunity to launch loyalty programmes or offer digital coupons as part of the tool. All retailers are looking for ways to expand their customer databases so they can accurately target and personalise interactions with customers, but the consumer benefits too. By accessing an app, they can manage a variety of different processes, from payment through to redeeming loyalty points or receiving special offers using one tool on their mobile.
The UK has been widely accepting of contactless payments, and consumers are reaping the benefits of easier and more convenient processes when paying for goods, particularly since the limit is now being raised to £100. The technology behind contactless is constantly developing and as biometrics are gradually incorporated into debit and credit cards, we will see more secure and even more convenient options emerging.