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Contactless Credit Cards Consumer Report 2006 …

Tags: 1950s, 1970s, 50 million, american express, consumer report, contactless card, contactless credit cards, contactless payment systems, debit and credit, debit cards, electronic payment, electronic payments, high frequency radio, magnetic stripe, magnetic stripes, merchant locations, microchip, new technology, radio signal, typical credit card,
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Language: english
Created: Thu May 18 11:38:25 2006

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Contactless Credit Cards Consumer Report 2006
By Jimmy Atkinson
April 3, 2006

Introduction to contactless payments

In 2003, electronic payments (debit and credit cards) finally overtook paper-based payments
(cash and checks) as the most common way to pay for purchases.1 Two years later, a new
electronic payment revolution quietly began. American Express, Visa, and MasterCard started to
roll out contactless payment systems in select retailers around the
world. The number of locations that initially accepted contactless
payments was small, but is now steadily growing.

By the end of 2006, it is estimated that between 35 and 50 million
credit and debit cards will be contactless and available for use in
25,000�50,000 merchant locations in the United States alone.2
Many experts are anticipating that this new technology could
A typical credit card featuring eventually obsolete the magnetic stripe, at which point all of the
a magnetic stripe. world's electronic payments would be contactless.

The technology behind contactless credit cards

While modern credit cards have been around since the 1950s, it was only during the 1970s that
the magnetic stripe made them widely popular. For decades now, credit cards have relied on
these magnetic stripes located on the reverse side of the card to store and transmit data with
relative ease and speed. Swiping this type of card requires physical contact between the magnetic
stripe and the reading mechanism.

Conversely, a contactless card stores its data on a microchip that is
embedded in the card's plastic. Consequentially, the data on these
cards is transmitted via a high frequency radio signal when the card
comes in close proximity of a special reader at the checkout stand.
This works through a technology known as radio frequency
identification, or RFID. When the card comes within four inches of
the reader, the antenna on the RFID chip is jolted to life by the
electromagnetic field created by the reader, and transaction data is
sent from the contactless credit card's chip to the RFID reader at
the checkout stand. You may already be familiar with the EZ Pass
toll collection system or ExxonMobil's Speedpass at the gas pump, An RFID chip
both of which use RFID technology.

Copyright � 2006 Find Credit Cards (http://www.findcreditcards.org) Page 1
Contactless credit card issuers
Contactless Card Issuers*
American Express is issuing the ExpressPay American Express
feature on all of its new Blue, Blue Cash, Blue � Blue from American Express
Sky, and Clear cards. American Express also � Blue Cash from American Express
offers an ExpressPay key fob that can be linked � Blue Sky from American Express
to any American Express credit card account or � Clear from American Express
prepaid with any existing American Express, Chase blink
Discover, MasterCard, or Visa card. � Chase MasterCard with blink
� Chase Flexible Rewards MasterCard with blink
MasterCard's PayPass, marketed as Tap N Go, � Chase Regal MasterCard with blink
is presently available on select credit cards � Chase Sheetz MasterCard with blink
issued by Chase and MBNA. It is also available � Universal Entertainment MasterCard with blink
� Chase Visa with blink
on select debit cards issued by Charter One,
� Chase Flexible Rewards Visa with blink
Citizens Bank, HSBC, and Key Bank. A prepaid � Chase Platinum Visa Business Card with blink
PayPass card is also available from Peoples � Southwest Airlines Rapid Rewards Visa
Bank. Visa Contactless is currently available Signature Card with blink
only on Chase blink cards. � Southwest Airlines Rapid Rewards Visa
Business Card with blink
� Wawa Visa Card with blink

MBNA PayPass
Where to use contactless cards � MBNA WorldPoints MasterCard PayPass
� NFL Extra Points MasterCard with PayPass for
Contactless payments are particularly handy in Baltimore Ravens, Detroit Lions, Kansas
City Chiefs, New York Giants, New York
environments that have traditionally been Jets, Philadelphia Eagles, Seattle Seahawks,
thought of as cash-intensive, such as gas and Washington Redskins cards
stations, movie theaters, convenience stores, fast
food restaurants, parking garages, vending Debit Cards
machines, stadium concession stands, and � Charter One Debit Card with PayPass
transit services. The common characteristic that � Charter One Gold Debit Card with PayPass
� Citizens Bank Debit Card with PayPass
all of these types of merchants share is the
� Citizens Bank Gold Debit Card with PayPass
customer's desire to get in and out quickly. � HSBC Debit MasterCard with PayPass
Having contactless payment systems in place at � Key Bank Debit PayPass
sports stadiums, for instance, would shorten
lines and speed transaction times, allowing the * As of 3 Apr. 2006

customer to get back in his seat quickly and
miss less of the game.

Locations capable of accepting contactless payments have a special contactless indicator symbol3
on their checkout stand's card reader. But paying with a contactless card is not limited to just the
new contactless readers at select locations. For the time being, the new cards are still being
manufactured with magnetic stripes on their backs and they look just like regular credit cards
with their numbers embossed on the front. Therefore, they are accepted anywhere a regular credit
card is accepted. With the number on the front, you can still make online and telephone
purchases with it. With its magnetic stripe, you can still use it to pay for dinner at your favorite
restaurant. The contactless chip is just another added convenience on top of what you're used to.

Copyright � 2006 Find Credit Cards (http://www.findcreditcards.org) Page 2
Merchants Accepting
Contactless Payments* Advantages of contactless credit cards
Merchant EP PP
7-Eleven What gives contactless credit cards their edge is that they are
AMC Theatres faster and more secure than traditional magnetic stripe cards.
Arby's
In terms of speed, contactless credit cards have both cash and
Boater's World
Burritoville magnetic stripe cards beat. According to Visa, the average
Carl's Jr. cash transaction takes 34 seconds and magnetic stripe credit
Central Parking card transactions take 24 seconds. Conversely, contactless
Cinemark credit card transactions take a mere 15 seconds.4 A
Cold Stone Creamery cardholder making a purchase simply waves his card over the
Cosi reader, waits for the acceptance signal, and is on his way. In
CVS Pharmacy
DFW Airport
an effort to further speed up the pace, Visa, MasterCard, and
Duane Reade American Express do not require signatures on contactless
KFC transactions under $25.
Loews Cineplex
McDonald's Credit card issuers are not only touting speed and
Meijer convenience, but also security as a benefit of having an RFID
QuickChek
credit card. According to Chase, the contactless payment
Regal Entertainment
Ritz Camera & Image
cards feature 128-bit and triple DES encryption5 that would
Sheetz make any stolen data useless to a potential thief.6 The cards
Sony Style also have built-in sensors that would disable the chip should
Subway anyone attempt to retrieve any personal data from a stolen
Walgreens card. Furthermore, just like regular credit and debit cards,
Wawa holders of contactless cards are not liable for any fraudulent
* = Participating locations only charges.
EP = American Express ExpressPay
PP = MasterCard PayPass

Disadvantages of contactless credit cards

Some privacy rights advocates and personal security experts have shown opposition to
contactless payment cards. They contend that RFID technology is by no means bulletproof and
may be vulnerable to security breaches. For instance, the radio transmission that occurs during
checkout could potentially get intercepted by a criminal's reader. It has also been hypothesized
that with a strong enough antenna, a criminal could simply walk up behind you, position his
reader near your wallet, and steal your credit card data without you ever knowing it.

While the above two examples are frightening for most to consider, rest assured that measures
have been taken against transmission interception and theft via a criminal's reader. First, the
actual credit card number itself is never transmitted via radio wave. Instead, a unique encrypted
code good only for each particular contactless payment transaction is transmitted. This
authorization code is good only once, as it changes with each new transaction. Therefore, any
data that is maliciously stolen would not be of much use to the criminal. Further, a criminal's
reader would have to either get very close to the card that he is attempting to steal or his reader's
antenna would have to be very large.

Copyright � 2006 Find Credit Cards (http://www.findcreditcards.org) Page 3
A more realistic adverse side effect of using contactless cards is that the technology makes it
psychologically easier to spend. Holders of such cards may end up unknowingly spending
more--and more often. According to a 2004 Smart Card Alliance study, the average number of
transactions that occurred each hour in retail locations with the new contactless payment readers
rose from 60 to 62. The average spend among contactless cardholders rose from $5 to $5.75.7
Consumers are advised that ease and speed of purchases do not give you more spending power.

The future of contactless payments

While Discover does not currently offer RFID cards, they are testing contactless payment
technology with cell phones. Many experts think that it is inevitable that contactless technology
will converge on the cell phone. In the not too distant future, it is quite conceivable that we will
be able to pay for just about everything with our cell phones, using the keypad to select our
method of payment and then waving the phone's RFID tag over the reader at the checkout stand.

Another vision of the more distant future sees consumers being able to pay for their groceries by
simply walking out of the store with a cart full of items. Strategically placed RFID readers at the
exits will add up the prices of all of the items and then deduct that amount from the user's RFID
payment card automatically. For now, however, it looks as though contactless credit cards are the
wave of the immediate future. And that future looks bright for consumers, merchants, and credit
card companies alike. With more contactless cards being issued and more merchants accepting
contactless payments every day, it is estimated that $11.6 billion will be transacted via
contactless payment systems by 2009.8

1
K. Chu. "Will that be cash, credit--or finger?" USA Today 1 Dec. 2005
.
2
M. Fetterman. "Wave-and-pay credit cards may make buying too easy." USA Today 23 May 2005
.
3
The contactless indicator symbol: http://usa.visa.com/img/branding/personal/contactless_indicator2.gif.
4
C. Said. "If you really hate to wait." San Francisco Chronicle 17 Feb. 2006. .
5
For more information on Triple DES security, please see http://en.wikipedia.org/wiki/Triple_DES.
6
E. Schuman. "How Safe Are the New Contactless Payment Systems?" CIO Insight 20 Jun. 2005
.
7
Fetterman.
8
L.M. Xideris. "Contactless Payments." WSTA Ticker Jun. 2005
.

Chu, Kathy. "Will that be cash, credit--or finger?" USA Today 1 Dec. 2005
.

Fetterman, Mindy. "Wave-and-pay credit cards may make buying too easy." USA Today 23 May
2005 .

Said, Carolyn. "If you really hate to wait." San Francisco Chronicle 17 Feb. 2006
.

Schuman, Evan. "How Safe Are the New Contactless Payment Systems?" CIO Insight 20 Jun.
2005 .

Xideris, Laura Mildon. "Contactless Payments." WSTA Ticker Jun. 2005
.