Contactless cards: the pros and cons of new payment technology
Smart cards which store data will make life easier, but are they safe?
Saturday 08 May 2010
When one of our readers, Mike Watts, was sent a new contactless Barclaycard last year, he wasn't happy. "I do not use my credit card, or debit card, in shops to pay for purchases of less than £15 and so have no use for this new contactless facility," he says. "I prefer a card that must be inserted into a payment terminal and the correct PIN entered, as it is considerably more secure."
He contacted Barclaycard to complain and ask for his old card back but got no joy. The credit card company began switching all its customers' cards to the new contactless plastic last year and it is committed to the new system. In other words, there is no stopping progress and Barclaycard told Mr Watts it was the new card, or no card. He chose the latter and cancelled his Barclaycard.
"If people want contactless cards then fine, but why should we all be compelled to have them?" he asks. "What happened to customer choice – or don't the banks have to take any notice of their customers?" Mr Watts is concerned about what happens if the cards are lost? With no PIN needed a crook could simply set out on a spending spree, is his worry. "Also what is the range of the cards and could one accidentally pay for the shopping of someone else? Finally could they be forged?" The final straw came last month when his wife was sent her new – contactless – debit card by Barclays. "I've written to the bank but am waiting to hear back from them. We are hoping they will send her a new ordinary card and that we don't have to change our current account to a different bank after about 35 years with Barclays. But I won't hold my breath," says Mr Watts. He has also written to the Office of Fair Trading about what he feels is an unfair lack of choice.
He isn't the only one concerned about the new way of paying. Among a number of other readers to contact Your Money is Paul Adkins, who researched electronic payment systems when he worked for electronics' giant Philips in the early 80s. "We discovered the best security would be offered by giving people a calculator-like device where the user had control over the keypad for entering the PIN," he says. "But this was perceived to be too expensive, and we ended up with chip cards. But who knows what is happening behind the keypad and the display? We have to take it on trust that the terminal is not compromised."
Mr Adkins – along with several other readers – believes the new contactless cards are being promoted to boost banks' profits, rather than improve security. "The banks see contactless cards as an opportunity to make money; particularly from shopkeepers who are lumbered with the cost of providing merchant terminals and the cost of processing card transactions," he says. "We will never move to the cashless society while the banks use it as an opportunity to make money."
Are their fears justified? Are banks and plastic card companies really taking chances with our financial security as they chase bigger profits? No, says Mark Austin, head of contactless at Visa Europe. "Contactless cards are extremely secure," he says. "They're just normal chip cards with an antennae. They work with a card reader only and the information on the card can't be picked up by anyone else. The cards have a maximum range of 5cms, so must be held close to the reader which then sends out a radio frequency. Once that's picked up by the card's antennae, the payment is made – and all in less than half a second." He says there is no data flying around for fraudsters to steal, and no time for crooks to tap into the transaction.
"The cards are about improving convenience," says Mr Austin. "The contactless function is only used for low-value transactions and we constantly talk to the banks about them, and other changes in technology, to ensure bank customers have the best experience when using their cards."
What about the risk of cards being lost and stolen and then used in a spending spree by villains? "That can't happen," says Barclays. "All contactless transactions, on both Barclaycard's and Barclays' debit cards, are covered by our standard fraud guarantee, so as long as a customer hasn't been negligent with their card or PIN they will be fully covered against fraud. In addition, if contactless cards are used for a number of transactions in succession, the card will ask for the PIN to verify it is in the right hands."
In short, that means that the reassuring chip and PIN feature will come into play after as little as three or four contactless transactions. With the transaction limit set at £15, raised from £10 earlier this year, that means fraudsters would only be able to spend up to around £50 before they would be asked for a PIN. And with all plastic cards, the standard fraud guarantee means cardholders won't be held liable for any losses, as long as the card issuer doesn't suspect you of being party to the fraud.
Around 10 million contactless cards have been issued in the UK so far with both NatWest and Barclays launching cards in 2007 and Halifax later. But the number of retailers accepting them is still relatively small, so many may not yet have had the chance to try them out. However, more retailers are signing up all the time, particularly fast food chains such as Pret A Manger and Eat.
"The real motivation is speed," says David Black of Defaqto. "Quicker transactions increase turnover for shops and can reduce the number of staff required. For consumers, shorter queues increases convenience." Londoners have experienced the contactless Oyster cards on London's buses, tubes and trains, which, in theory, have led to cheaper fares.
There is an argument that plastic cards are safer than cash. If money is stolen, you lose it: if a card is stolen, you shouldn't be liable for fraud. The industry's next step is to introduce payment by mobile phone, but that technology is a year or two away yet. In the meantime, those worried about contactless cards should vote with their feet. HSBC, Nationwide and Santander all say they currently have no plans to introduce the cards.
Banker's view: Brian Cunnington, head of debit cards, Barclays
"Contactless technology is undoubtedly the future of payments. It simply makes life easier: it's secure, convenient and a practical alternative to cash. We know anything new and unknown can be daunting but fears about contactless security are unfounded.
As a bank, the security of money is our number one priority so if we believed there was any increased security threat with contactless cards we simply wouldn't be introducing them. The card cannot be swiped accidentally, doesn't expose personal information and will ensure the PIN is entered periodically, as well as all the normal debit and credit card protection. Countries including the USA and Canada have had contactless for a while and have seen no notable increase in fraud as a result. We are at the early adopter stage but the possibilities with contactless technology are endless – there are already plans to introduce mobile phones with contactless functionality. Payment technology is definitely coming out of our wallets and contactless cards are the first step towards that."
Consumer view: Handy, but budgeting is a worry
By Martin Hickman, Consumer Affairs Correspondent
Contactless cards are certainly handy. They obviate the need to dig around for cash and by speeding transactions – and queues – their adoption could save us all some time while picking up a sandwich.
They also do away with the need to carry large quantities of steal-able notes and heavy coins.
But I have three concerns. First, the card companies take a cut of electronic payments from traders and even though these slivers are not apparent to shoppers, inevitably they are passed on in the form of higher prices. Then there's the question of whether it's harder to keep a track of your money if you're not handing it over in hard currency or acknowledging its expenditure with a pin code. More abstractly, I quite like the vanishing quality of cash and wonder whether allowing the archiving of every last jot of personal spending gives too much information to commercial enterprises. Not so much Big Brother, perhaps, as Big Uncles?
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
- 1 Nigel Farage: Me vs Russell Brand on Question Time – he's got the chest hair but where are his ideas?
- 2 Harry Potter fans can apply to the Hogwarts-inspired College of Wizardry
- 3 Jessica Chambers: 19-year-old woman 'doused with lighter fluid and burned alive' in the US
- 4 Russell Brand calls Nigel Farage 'poundshop Enoch Powell' in BBC Question Time debate
- 5 Orange Wednesdays are no more
Disgruntled RBS worker writes hilarious open letter to Russell Brand after anti-capitalist publicity stunt leaves him hungry
Nigel Farage defends Kerry Smith 'ch***y' comment: 'If you are going for a Chinese, what do you say you’re going for?'
Nigel Farage's approval rating hits 'record low' as popularity suffers in wake of Ukip sex scandal
Pakistan school attack live: Taliban kill at least 132 children in 'horrifying' massacre
Sony hack: Angelina Jolie branded 'seriously out of her mind' in further embarrassing leaked email saga
Panic Saturday: 13 million Britons spend £1.2bn – while 13 million others across the country live in poverty unable to afford food
iJobs Money & Business
£20000 - £25000 per annum + OTE £40,000 + Car + Pension: SThree: SThree are a ...
£20000 - £25000 per annum + OTE £35K: SThree: We consistently strive to be the...
£20000 - £25000 per annum + OTE £35000: SThree: SThree are a global FTSE 250 b...
£20000 - £25000 per annum + OTE £35K - £45K: SThree: SThree Group have been we...
Day In a Page
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens