1. How do they work?
Contactless debit and credit cards operate through Near Field Communication (NFC), a technology that enables devices to use radio-frequency identification to establish contact while in proximity. It can be likened to Bluetooth or WiFi. It allows communication between NFC-enabled objects at a minimum distance of 4 centimetres.
In order to use a contactless card, all you need to do is tap the card at the reader at the point of sale and enter your PIN. You don't have to hand over the card to the merchant to swipe or dip it into the EDC (Electronic Data Capture) reader.
2. What are the risks?
These cards are already in use in some countries. There have been reports of frauds using free mobile apps to read and hack into NFC data. NFC technology is vulnerable to skimming attacks as well. The data on the card can be used for stealing the cardholder's identity.
There have been instances of card information being stolen by frauds using their cell phones when they are near a person carrying a contactless card. A University of Surrey study says contactless payment data can be captured by criminals from a distance of up to 40 centimetres. This is known as an eavesdropping attack.
3. How to ensure security
Even though payment processors do not believe that such cards compromise security, they claim that cardholders are protected by a Zero Liability Policy, which means they are not held liable for unauthorised transactions. However, it is in the customers' interest to take precautions.
According to experts, if you are planning to get a contactless card, you should wrap it in aluminium foil, or keep it in a steel case. This prevents fraudsters in your vicinity from stealing your card information using mobile apps. Also, even though you don't need to give the card to the merchant to carry out a transaction, you should be just as careful when entering the PIN as you are when using a normal payment card.
4. What are the benefits?
Contactless cards offer payment convenience. You simply have to tap the card in front of the reader to make the payment. The verification process takes seconds and you get a payment confirmation at twice the speed of a conventional transaction using regular credit or debit cards. Also, you don't have to hand over your card to the merchant or the waiter or the petrol pump employee.
Your card is never out of your sight, which means the merchant does not get to see your card details. Contactless card providers say that such cards offer enhanced protection and hence are safer and more secure. Also, it's only a matter of time when you will be able to make a contactless payment using NFC via your mobile phone, which will further add to the ease of making payments.