In the middle of the 20th century, credit cards emerged as a new way to pay for goods and services. Then automated point-of-sale systems came along and replaced the old carbon-copy method of processing transactions.
In the 21st century, mobile-payment systems began replacing traditional POS systems by allowing merchants to accept credit cards by attaching a card reader to a smartphone or a tablet computer. Today, another mobile technology — contactless payments — is simplifying the payment process even more.
What Are Contactless Payments?
Contactless payments are POS transactions that charge a credit or debit card account without requiring the customer to swipe the actual card. These types of payments began with special credit cards that contained radio frequency identification, or RFID, chips in them, permitting users to wave the card near a device — and perhaps enter a personal identification code on a keypad — to pay for purchases.
But the fastest-growing contactless-payment system is near-field communications, or NFC. NFC builds on RFID technology by allowing personal digital devices and transaction-processing equipment to “communicate” with one another.
Mobil gas stations in the U.S. were among the first adopters of contactless payments with the company’s Speedpass system, which allowed drivers to wave a key fob near a pad on the gasoline pump to pay for fuel. Over the past few years, European banks have issued RFID-enabled credit cards to millions of consumers. The technology is quickly being embraced around the world as a convenient way of conducting business.
Revolution or Fad?
So, are contactless payments the “wave of the future”?
The jury’s still out on that question. Some consumers are concerned about the security of the technology; they don’t want to risk having their personal data compromised. Others worry that if they lose their RFID credit cards or smartphones, a criminal could easily access their accounts.
But perhaps the biggest obstacle facing the worldwide acceptance of contactless payments is a lack of added value to the shopping experience. In other words, many consumers don’t think that pulling out a credit card and swiping it at a machine is cumbersome or problematic, so they may view contactless payments as a solution without a problem.
Therefore, the challenge of those companies who provide contactless payment services will be to convince the public that this technology is beneficial. One approach is to synchronize a merchant’s coupon offers and loyalty rewards with the contactless payment system, so that a customer can access those programs simultaneously via a smartphone or a tablet PC. Still, it remains to be seen whether contactless payments will revolutionize POS transactions or fall by the wayside like Betamax and the Newton.