Contactless Payment

1. Contactless Payment

2. What is Contactless payment? • The latest implementation of wireless payment • A device with a tiny chip and antenna embedded in it • Communicates through radio frequencies (RF) • Devices include: • Plastic cards • Watches • Key fobs • Money clips • Cell phones

3. How DO They Work? • Tap and Go technology • Customer must hold the device in front of a sensor, usually on a Point of Sale (POS) terminal • Smart chip and antenna in the device transmits a unique code to the sensor • After the transaction is complete, the consumer either hears a beep or sees a flashing light • The transaction goes through the sponsoring networks (MasterCard, American Express, Visa) system to be cleared and settled • If the purchase more than $25, a signature or PIN may be required

4. Obtaining a Device • Contactless payment devices are distributed through financial institutions and connected to issuers such as Visa

5. Companies Using Them • First issued by Exxon Mobile in 1997 • “Speedpass” is used at gas pumps • Still used today • Today • American Express – ExpressPay • MasterCard – Paypass • Visa – Visa Contactless

6. Growth • Since 2005, millions of contactless payment devices have been distributed • The rate of deployment is the highest ever observed for emerging payment products

7. What are the Benefits? • Issuer • American Express, MasterCard, Visa • Consumer • Individual making the purchase • Merchant • Store • Brainstorm two benefits for each group

8. Issuer Benefits • Issuer • Contactless payments have: • Increased credit and debit card transactions • Decreased cash transactions • Improved customer retention and loyalty • Provided co-branding opportunities • Provided new service opportunities

9. Consumer Benefits • Consumer – seek speed and convenience • Faster check out times and less waiting in line • Convenience of not carrying cash • Easier to use – no PIN or signature required if under $25 • Improved security – consumer is in control of the device at all times • Better record keeping with monthly statements compared to cash

10. Merchant Benefits • Merchant • Increased customer loyalty and satisfaction with the store experience • Reduced time at the cash register • Improved operational efficiency – less cash handling • Increased revenue from increased consumer spending per transaction • Decreases concern of counterfeit money or insufficient fund checks

11. Availability • Over 35,000 merchant locations are enabling their POS systems to accept contactless payment • 7-Eleven, Inc. • Jack in the Box • McDonald’s • Regal (Theatres) Entertainment Group • Walgreens • Ritz Camera • Subway • Cold Stone Creamery

12. New Technology • New York City • Using contactless payment for direct access on the NYC transit system • Giant Stadium • In September 2006, the first 5,000 fans to enter the stadium were given wrist bands with $25 electronically loaded on them for use at concession stands • Atlanta, GA and Dallas, TX • Several companies are teaming up to test contactless payment in cellular phones

13. Future Predictions? • How will contactless payment or other technologies advance in the years to come? • Brainstorm three possibilities with your group. • Share responses.

14. Safety • Contactless payment as implemented by American Express, Master Card and Visa is secure • Older forms with radio frequency identification (RDIF) do not have the same safety features • Devices can be read from a few inches to a few feet away increasing the risk of fraudulent use

15. Safety • American Express, MasterCard and Visa contactless payment devices include: • Unique codes that change for each transaction • Payment networks can detect and reject any attempt to use the same code more than once • Therefore, if a fraudster should “read” information from a contactless transaction, the information would be useless • The customer’s name is not exchanged between the device and the terminal • Some smart chips in the devices do not even hold the customer’s name, therefore ID theft is more difficult

16. Safety • Some payment devices do not include the cardholder’s account number • They use an alternate number that is not used in any other transaction, therefore ID theft is more difficult • Transactions are completed solely by the customer • The device is never handed over to a store clerk, therefore personal information is kept more secure • Smart chips only send signals a short distance, 2-4 inches • The customer needs to make a deliberate effort to initiate the payment transactions

17. Protecting one’s Identity • As with all forms of electronic payment, it is important to follow the following safety precautions • Do not leave contactless payment devices lying around home or school • Close unused accounts in writing and by phone, then dispose of the device • Check financial institution statements and credit report to ensure all charges are legitimate

18. Protecting one’s identity • If a contactless payment device is lost or stolen, report it to the sponsoring financial institution immediately • $50 liability • Zero Liability • Keep financial institution statements and other documents with personal information in a secure location • Prevent a thief from securing a contactless payment device under false pretenses

19. Summary • Contactless payment – new payment method • Benefits for issuers, consumers and merchants • Safety features • Protecting one’s identity