Ready or not, contactless cards are coming your way
By Marianne Curphey
If you have had a new credit or debit card arrive in the post recently, you may have noticed a "wave" symbol on it, indicating that it can be used for contactless payments.
Using a contactless card enables you to wave it at specialized contactless card readers without having to enter your PIN -- as long as the transaction is £20 or less. As with a regular card, money is automatically deducted from your bank account or added to your credit card bill.
There's been much buzz about these types of cards. Yet, according to a May 2012 survey from Mintel, they aren't
exactly popular among consumers. Just 5% of Brits have used a contactless card,
and many who have been issued contactless cards don't know about the
contactless feature or opt not to use it.
Yet, with banks and retailers alike pushing the technology, you won't be able to avoid contactless cards forever. Here's what you need to know about these cards before giving them a chance.
The roll-out of
In August, Co-operative Bank announced it was planning to issue contactless payment cards to its 2 million debit and credit card customers, giving them to all new customers and replacingexisting cards when they expire. Other banks already issuing them include Barclays, HSBC, Lloyds, Halifax, MBNA, NatWest and RBS.
Companies reissue cards roughly every two years, so if you don't have a contactless card already, it's likely that the next credit or debit card you receive will have contactless technology included.
The UK Cards Association, the trade association for the UK card payments industry, says contactless cards let consumers pay for goods more quickly. Neil Aitken, UK Cards Association spokesman, says that the recent increase in the amount you can spend in each contactless transaction -- a rise from £15 to £20 -- could make contactless more widespread. Contactless readers are now available in more than 50 national retailers, including Greggs, Boots and Little Chef.
"There are 26.5 million contactless cards out there, and if you have bought from McDonald's or Pret you will probably already have seen the contactless payment points," Aitken says. "The Co-op has just announced that it has installed them in all its shops inside the M25 in London. The Post Office is also putting contactless payment systems in its 11,500 branches, which is significant because 99% of the population is within one mile of a Post Office."
Aitken also points out that Visa put in contactless technology at all the Olympic venues in London -- and that one in six transactions at the Olympics worth £20 or less was made using a contactless card.
"We don't have figures to compare this to but it is a significant number and it shows that it is gathering momentum," Aitken says.
Compared with banks and major retailers, it seems that consumers have been less enthusiastic about using contactless cards.
According to Mintel's figures, just a quarter of contactless card holders have made contactless payments. The majority of consumers (72%) think contactless cards should be issued only on request.
However, the UK Cards Association said it is not possible to "opt out" of receiving a contactless card. Yet, if you don't want to use the contactless feature, you don't have to.
Retailers, meanwhile, have argued that encouraging the use of cards for low-value transactions will hurt their profits -- as they'll have to pay transaction fees on small purchases that otherwise would likely have been made with cash. However, Aitken says that many businesses have been choosing to use contactless payment technology anyway to keep up with innovations in the payment market.
With the technology so new, some consumers are wary. More than half surveyed by Mintel said they worry about the security of contactless payments.
"Consumers do have concerns about whether someone could have a device which reads your card and gathers data from it, and security worries partly explain why take-up has been relatively slow," says Yvonne Goodwin, an independent financial adviser with Yvonne Goodwin Wealth Management.
Yet contactless cards have the same level of protection as traditional plastic cards -- meaning that customers will suffer no loss if they are victims of fraud. Not having to enter a PIN could make it easy for thieves to use a stolen contactless card. Yet, their transactions will be capped at £20. Plus, a built-in security feature of the technology requires the shopper to enter a PIN every six transactions or so.
When it comes to staying on budget, however, the ease of contactless payments might pose a risk. With payments under £20 requiring only occasional PIN verification, customers will need to keep a closer eye on their finances to ensure that lots of small, forgettable, instant payments don't send them overdrawn.
"Banks want to have a cashless society because they can't make money from consumers using cash, whereas they can get their cut of the profit if we use debit and credit cards," Goodwin says. "It is up to you to ensure you have enough money in your account when you make the cashless payment."
Published: 4 September 2012
- What payment technologies are in store for 2017? – The UK's reputation as a payments trend setter is set to continue this year ...
- What's holding back mobile payments – Apple Pay, Android Pay and other mobile payment platforms have been in the UK for over a year -- but they've yet to really take off ...
- The voice command payment revolution – Voice recognition technology is poised to revolutionise the way we buy items and conduct personal banking ...