Contactless Payment Myths, Debunked

Debunking Myths About Contactless Payments and Security

By Jean Michel, Chief Technology Officer, Total Processing. 

A contactless transaction is when an electronic device is used to pay for goods or services. The use of chip and PIN (personal identification number) technology in cards has led to an increase in the popularity of contactless transactions. However, many consumers are still unsure about how they work and what benefits they offer; here’s a roundup of some common myths that have been debunked.

Myth 1: You should always pay with your credit card because it carries lower fees than your debit card/cash for both you and the merchant.

This isn’t always true. While credit card transactions do carry lower fees than debit card transactions, no matter what payment method is used, the merchant’s bank or acquiring bank will always charge them a fee for every transaction. This fee is known as MIFID (merchant interchange fee) and it’s determined by the price and type of goods and services purchased.

Myth 2: Contactless cards can be read from a distance by someone using equipment purchased online for cheap.

The prototype contactless card (chip and PIN) was developed after 2005 to provide faster payments through the use of the MasterCard/Visa card payment network. The cards were designed with minimal security features, including no personalisation or encryption of the card data; this meant that it could be read by either the holder or an eavesdropper using a device capable of reading magnetic strips (such as a laptop). This led to added security features being developed by MasterCard and Visa in 2009.

Myth 3: All contactless cards are the same.

Contactless cards can be divided into four groups; plastic; magnetic strip (Hybrid); virtual (i.e. no physical card) and chip and PIN (hybrid). Plastic cards are used worldwide, although in Ireland they are primarily used for merchant cash advances or POS transactions at service stations to pay for fuel or refills. Hybrid cards mostly come in the form of Oyster PayPass-enabled smartcards which can be used on London Underground trains.

Myth 4: Contactless payments are not safe.

This is definitely not the case. Contactless payments are exactly the same as chip and PIN transactions when it comes to safety. Contactless payments also have a spending limit where you’ll be prompted to enter your pin when you go over this amount.

Some people argue that they are safer transactions compared to chip cards with PINs because contactless cards are difficult for fraudsters to copy, due to their short-term security measures.

As with any card payment, you should always keep an eye on your transactions and notify your bank if something looks out of place.

Myth 5: Contactless cards are better than cash because they’re more secure.

In terms of security, contactless cards are not necessarily safer than cash, they both have different drawbacks. Contactless cards pose a greater risk of fraud as they can be used across multiple merchants and point-of-sale (POS) terminals.

Myth 6: Contactless payments are too expensive for smaller amounts.

This is definitely not true, contactless payments are cheaper for smaller transactions. One of the main advantages of contactless payments is that it’s easy for small business owners to use them, as there is no additional cost or equipment needed. The merchant can simply set up their terminal to accept contactless payments.

Contactless payments are cheap, safe and easy. If you are in fact looking for an opportunity to purchase something of value via contactless payment, then this is the real deal. However, if you want to avoid any risk of your transactions being stolen or attempted theft, always remember to keep your PIN protected and always notify your bank if things don’t look right.

If you have any doubt about applying for plastic contactless cards or to even enable them where applicable, it’s always best to speak to your bank directly. In contactless transactions, banks take on the role of the acquiring bank. In order to avoid being a victim of contactless related scams, it’s important to check that you have a bank-issued card and that your card details have not been skimmed. Contactless cards are a convenient way to pay but it’s very important that consumers are aware of how they work and don’t become victims of online myths.