CONTACTLESS PAYMENTS

Everything you need to know for your business

Everything you need to
know about contactless
payment
Rapid developments in technology are changing the way we
live, work, learn, socialise and especially the way we pay.
Contactless payment is booming. It takes less than a second to
process a transaction, making it perfect for our fast paced lives
where were always on-the-go, with no time to hang around.
There are 36.3million contactless enabled cards in circulation
in the UK and an estimated 125 transactions a minute on VISA
cards alone in Britain. Contactless activity is growing at an
average of 22 per cent every quarter. In the year to September
2013, an astonishing 461.6million was spent with VISA
contactless cards in the UK.
Business owners love it because it speeds
up transaction times, cuts down on queues
and reduces sales lost with people deciding
theyre too busy to wait.
Major high street names such as Marks & Spencer, Co-Op,
Waitrose, Post Ofce, Boots, Costa, Greggs, McDonalds,
Wilkinsons, WH Smith, Wetherspoons and even The National
Trust are among the organisations that have adopted the
technology - with 164,000 contactless terminals in operation
in the UK, according to industry body the UK Cards Association.
There will be at least one business on your high street using
contactless technology as this next step in the smart payments
journey becomes more commonplace. And of course, whilst
harder to measure, take-up in the independent business sector is
increasing too. In fact many businesses already have contactless
enabled payment terminals, but are unaware of the additional
capabilities they hold.
So, lets dive in to the world of Tap And Go
to see how you and your customers can get
the most out of this technology.
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Who supports it?
Banks who have issued contactless cards include Barclays,
NatWest, HSBC, Capital One, Co-operative Bank, Lloyds,
MBNA, RBS and Newcastle Building Society. MasterCard
branded cards use a system called PayPass while Visa has
its own version called PayWave.
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What is contactless?
Contactless payment uses a short range wireless system called
Near Field Communications (NFC). Debit and credit chip cards
are tted with an antenna that enable them to communicate
with devices at a radius of up to ve centimeters. Cardholders
pass their cards close to a contactless enabled payment
machine at the point of sale to register their payment.
Originally developed back in 2008, its use became more
widespread after the huge success of the London Underground
Oyster system, which uses contactless payment to debit
amounts from pre-loaded cards. This drove down costs for the
operator, led to fewer cases of fraud and provided the public
with quicker journey times.
How does it work?
Following the success of Oyster in London, contactless was seen
as the solution to faster payments for businesses and the public
across all sectors, particularly those with low value, frequent
transactions such as newsagents, bakeries, convenience stores,
chemists, takeaways and bars.
While the main benet of contactless is to speed up the
process by removing the need for the customer to verify every
transaction, there are still checks in place. The cardholder has a
ceiling on their card of 20 per transaction and cannot go more
than ve contactless transactions without being prompted to
enter their PIN to conrm identity.
Contactless terminals are programmed so that only one
payment from one card for one transaction can go through at
any time. In order to put a second payment through, the card
has to be removed from the NFC range and a new transaction
has to be initiated. In addition, if the payment terminal senses
more than one card in the NFC range, the transaction is rejected.
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Is it safe for my business
and my customers?
In a word, yes.
According to a survey by Retail Week magazine in July last year,
82 per cent of the public still had security fears over contactless
payment. Stories abound of people unwittingly paying for items
via the card thats in their purse or inside their handbag that
they had just rested near the payment machine. And worse, of
people having no idea theyve even made a transaction until
they see it on their statement a month later.
However, such instances are extremely isolated and are being
put down to errors at the point of sale by the business and
cardholder as these cards like any other do not just take
payments automatically. In a typical transaction, the sales
assistant enters the amount rst before the card is presented
and the contactless card needs to be less than 5cms away to
register.
Businesses wont be exposed to any greater
risk of fraud as contactless cards use the
same high level technology thats behind
chip and PIN.
Specic anti-collision software is also installed on contactless-
enabled terminals if a reader detects two cards, the merchant
is asked to clarify with the cardholder which one to make the
payment from.
Cardholders can also improve the safety and security of their
cards by always removing them from their purse or wallet
before presenting it to a contactless reader.
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How susceptible are these
cards to fraud?
Retailers have the same protection against fraud as they do with
chip and PIN transactions. And just like any other card, as soon
as it is reported missing or stolen its blocked and if reasonable
steps have been taken to ensure its safety, the cardholder wont
be liable for any activity on the card after it is reported.
From the cardholders viewpoint, if thieves stole a card, they
would only be able to make a handful of 20 or less purchases
before being required to enter a PIN.
According to Financial Fraud Action UK, the
total amount of UK fraud reported from
contactless cards in 2012 was 13,700. To
put this into context, 216million of fraud
was reported on debit and credit cards in
the UK.
Earlier this year, researchers at the University of Surrey claimed
to have invented technology that allowed them to read the
details of all cards being used at up to half a metre away from a
contactless terminal. However, the UK Cards Association insists
that no useable information would be able to be picked up,
therefore fraud is highly unlikely.
A mobile application has also been developed by Newcastle
University that claims to be able to read the name, number and
expiry date from a contactless card. This could allow fraudsters
to rack up purchases on websites that do not ask for the three-
digit security code before completing transactions. However,
while technically possible, the effort required is deemed to far
outweigh the possible return.
According to the website contactless.info, set
up by the participating bodies in contactless
technology, the security built into the chip
on a card means that any data intercepted
would not work if someone tried to use it
again.
The card generates a unique cryptogram
for each transaction (based on the secret
cryptographic keys in the chip, the
transaction counter, and a random number
produced by the terminal) that is used to
validate the data.
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Customer case study
How does it work in practice? Heres the experience of one
retailer, Hasan Akis, of Tarves Food and Wine in south east
London.
We went contactless about six months
ago and we wouldnt be without it now.
Being able to take payments this way has
beneted our business dramatically with
payments of 20 or less taking less than a
second.
This, in turn, reduces queuing time and allows us to serve more
customers. At busy times, the difference in store has been
noticeable and theres less frustration among customers and
staff. Being able to spend more than just the change in their
pockets has also led to an increase in the average spend of our
customers too.
Some customers didnt understand at rst that their cards
were enabled with contactless technology. But wed made sure
all of our staff had been trained in what it was all about and
how it worked so we were able to guide customers through the
process.
A few customers have asked about how secure contactless
payments are and we have been able to reassure them that
their transaction is as safe as a regular chip and PIN transaction.
This is such a quick and easy process that its clearly the next
step in electronic payments and before long everyone will be
using it.
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What else can be done with
a contactless terminal?
The terminals are able to do everything a chip and PIN terminal
can. If you are in a business where tips are common, these
gratuities can be added, although they need to be added
up beforehand so one amount is put through the terminal.
Contactless transactions cannot be performed for cashback or
refunds. Receipts are usually not automatically issued, but can
be given to cardholders on request.
Is it more expensive?
Contactless transactions on debit cards attract lower charges
for businesses than chip and PIN transactions, which make
them ideal for low value sales. For credit cards its the same
rate as chip and PIN i.e. a percentage charge.
Businesses may need a new payment terminal when deciding to
take contactless payments. This is generally no more expensive
than a traditional chip and PIN terminal.
Contactless machines are available with colour screens and
there will be savings to be made on paper rolls as the machines
only issue merchant receipts (the cardholder can request a
receipt), which is environmentally friendly as well as quicker to
process.
In addition, all staff will need to be trained in how to operate
the terminal and how the contactless process works, so they are
able to advise cardholders and avoid problems. Display material
at point of sale will also raise awareness that the service is now
on offer.
THREE STEPS TO REMEMBER
Conrm:
A beep means the payment has been
successfully processed.
Touch:
Look at how the cardholder presents their
card to the reader, and ensure they hold it
in place until the light turns green.
Look:
Make sure the contactless sign is clearly
displayed around your point of sale.
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Future developments
Its not just about cards, there are a range of future developments
using the same technology to facilitate payment transactions,
including contactless enabled smartphones, wrist bands and
watches all supporting e-wallets containing a customers virtual
card. The 20 transaction limit is also being reviewed and the
industry is developing contactless higher value payments
which will enable payments of more than 20 to be made.
Further anti-fraud measures will go hand in hand with such
developments to safeguard the integrity of contactless.
Why should I be offering
contactless payment to my
customers?
Whatever kind of business you are, the number one rule is
to listen to what your customers want. Having the option to
offer contactless payment is clear proof that you are keeping
up with the way public spending habits are changing and not
missing out on sales. Despite the hype, the risk for businesses
and cardholders is no different to chip and PIN transactions.
We know that there are also business owners who prefer to
engage their customers and therefore dont want a quick
transaction. In these instances, contactless would provide a new
tech option that leaves more time to talk and engage as the
payment process is over in the blink of an eye.
With so many cards in circulation and more being issued all the
time, this will soon be the way customers expect to pay. So can
you afford to ignore contactless?
The speed of transaction is the
obvious benet to the cardholder.
Many business owners see the
advantage of this too, with quick
tap and go payments helping to
reduce queues at peak times and get
more customers through the door.
Find out more
We hope you found this information useful, however we
understand that the payments industry is complicated, so if
youd like to talk to Handepay about your business needs and
how contactless technology can benet you, please get in touch
by emailing marketing@handepay.co.uk or call 0800 377 7382.
Handepay has also produced a guide to getting started with
card payments, its free to download and is available from
www.handepay.co.uk/accepting-card-payments