The technology behind contactless payment | Venturus

The technology behind contactless payment

From their conception to the present day, credit and debit cards have become increasingly widespread as payment methods around the world. Cash and cheques are less and less used, except in some places due to cultural or structural reasons. I have not particularly used a checkbook for years and the money I carry with me is used only for emergency purposes, such as for payment at a store where the owner only accepts cash.

Payment means is one of the areas with large investment in new technologies. Continuously we see new features or adaptations from other areas. One of these technologies is the use of radio frequency card identification, more precisely the use of Near Field Communication (NFC). With this it was possible to develop the technology that just approach the card to allow the payment. This is the technology of contactless cards.

NFC History

NFC technology is derived from RFID (Radio Frequency Identification), widely used in logistics for product identification and localization and also in transportation, for toll payments without the need to stop at the gate. RFID originated in the early 1970s and consists of three components: a reader, a tag, and an antenna responsible for exchanging information between the reader and the tag. This information exchange occurs through a magnetic wave field where the tag responds when asked by the reader. NFC began to be defined in the early 2000s, and basically the change is the communication distance between the reader and the tag. While RFID can read data for tens of meters (up to 100 meters), NFC works between 4 and 10 centimeters. This increases the level of security in information exchange as there is no (or at least hinders) interception between devices. Thus, NFC began to be applied for various purposes: as door keys in hotels, bus and subway turnstiles, access cards in companies and also as payment cards. More recently, mobile phone manufacturers have started implementing NFC on their devices (Apple Pay, Samsung Pay, among others) and now we see it implemented on wearable devices like smart watches and wristbands.

Use as a means of payment

It was in South Korea in 1995 where, still using the RFID standard, the cards began to be used to pay for bus trips. Later in the United States, gas stations also began accepting such payment cards. Approximate payment offers a certain degree of convenience to a transaction: data reading and local card validation is super fast (less than 1 second), in some cases there is no need to enter passwords, reading is also possible even with the card in a wallet or card holder and, in the case of wearable devices (smart watches), not even the card is required. However, even with these facilities and agility, in some markets the implementation of this model does not happen so quickly as to replace the standard chip reading process (where there is a need to insert the card and wait for the data of the chip to be read and validated).

But then why is its adoption slow?

Several factors can influence. In Europe there is a fast growth in the use of the model. Researches show  that the Czech Republic has NFC in 90% of its POS and that 70% of transactions are made using the technology. On the other hand, the US technology niche is far behind in deployment. But the reason is that because of the low level of transaction fraud, the implementation of EMV (last major change for security) was late and only now cards are being exchanged for new ones with NFC. In the Brazilian market, some factors influence the implementation:

  • Most payments are still made in cash, perhaps for cultural reasons to be reluctant to adhere to new concepts. In this case, it is not just a matter of migrating to payment by approach, but the need to break the paradigm of no longer using money and using cards;
  • There is a good base of terminals that support NFCs installed, but there is a cost to migrate those that do not support them yet. It should be borne in mind that the flood of card machines that have entered the market recently, even with the pattern already promising, not all models support NFC;
  • Train the retailer to conduct transactions using NFC and encourage the consumer to use it as well. This, which seems to be a mere detail, can actually slow the process down a lot. For the operator, the process of entering information into the POS becomes mechanical, and when choosing a different form of payment that he is accustomed to, he will have to modify the way he enters payment data, reflecting negatively on the time spent. Even where technology is already in place, retailers rarely ask consumers if they want to pay using the approach method;
  • Another corroborating item is the purchase price. Some countries determine a maximum value, others not, as is the case of Brazil, but when making a purchase with value over $ 50.00 the password will be required and thus the agility of the model is no longer relevant.

As for card issuers, major institutions such as Banco do Brasil, Itaú, Bradesco, among others, as well as digital services such as Nubank already provide contactless cards, although in some cases the option is for certain models. such as those for high-income customers.

As noted, contactless payment is one of the means of payment that has come to simplify and streamline the point-of-sale process, so even with the emergence of new payment modalities such as virtual wallets and QR Codes, membership This functionality tends to increase as retailers adapt to its use.

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