How Do Contactless Credit or Debit Cards Work?
It has been a few years since the Reserve Bank of India (RBI) had allowed financial institutions and merchants to use contactless credit or debit cards for transactions. However, several customers are still apprehensive about using such contactless cards, especially about payment being deducted from their cards for transactions initiated by someone else. 
 
Let us see how these contactless cards work in practice. While everybody refers these cards as contactless, what they really mean to says is, cards that can be connected through wireless technology. Or simply, there is no need to insert the card in to the machine and then type your personal identification number (PIN) to authenticate the transaction. 
 
In contactless card payment transaction, all you need to do is to tap your card on the machine for any transactions valued up to Rs2,000, and wait for the green light or beep sound (for acceptance of payment). That’s it. In addition, as per the guidelines issued by the RBI, you or your bank or the card issuer can limit the amount per transaction or the number of transactions per day. 
 
Contactless card is quite useful for small value transactions. Anywhere you see the contactless symbol at checkout or billing counter, you can simply tap to pay. Many fast food restaurants, petrol pumps, malls, convenience stores, pharmacies, and theatres, among others accept contactless card payments up to Rs2,000. 
 
However, for transactions of over Rs2,000 you will have to use the chip and PIN system, as per the RBI directions. 
 
Now let us see the security angle. According to Visa, one of the global payment network services providers, contactless cards are as secure as any other chip card. "They carry the same multiple layers of security, which ensure that you are safe from fraudulent or unauthorised transactions. Contactless cards work when the card is within 4cm of the card reader and the contactless payment terminal can only process one transaction at a time. Because your contactless card does not leave your hand during the transaction, you remain in control of your card at all times," it says.
 
Many customers who are not aware of this aspect feel that someone can misuse their contactless card and deduct money for transactions not initiated by them. However, this fear is misplaced. As Visa has pointed out, the card remains in the hand of the customer and this system works only when this card is within 4cm to 6cm from the machine. In addition, the cashier at the billing counter will have to put in the amount in the terminal to activate the reader before the card can be tapped. 
 
One thing should be clear here. The contactless card has a built-in antenna that responds to the reader signals emitted by the reading machine and then transmits encrypted signal back to the reading machine through radio waves. So the wallet, which has the contactless card, needs to be placed within 4cm-6cm to complete the transaction. This means you do not need to take out the card and tap it on the reading machine physically. 
 
Also remember, there is no battery in the contactless card so you cannot turn it off.
 
 
Having said that, if you have more than one contactless card, then in such cases, you will have to physically tap the reader with the card. Otherwise, in such case, payment would be deducted from the card that is closer to the reading machine. 
 
In addition, the RBI has issued guidelines for banks and card issuer companies on providing a token that can be used to perform card transactions in contactless mode at point of sale (POS) terminals, or quick response (QR) code payments. The 'token' refers to replacement of actual card details like primary account number (PAN) with a unique alternate code, which would be unique for a combination of card, token requestor and identified device. 
 
These tokens can be used for mobile PoS transactions, in-app purchases or online shopping. Talking about benefits of tokenisation, MasterCard says, “Tokenisation reduces fraud related to digital payments by making transactions more secure by including a dynamic component with each transaction. It takes the security of a physical EuroPay, MasterCard and Visa (EMV) chip and applies it to non-card environments including proximity and internet payments.”
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    COMMENTS

    Mohan Sivanand

    5 months ago

    One point this otherwise informative article ignores is loss of card and subsequent misuse for transactions under ₹2000, maybe multiple times. Often, people who lose a card are not aware they lost it for days till they may need the card again. If there's a compulsory PIN it seems so much safer. Another thing I noticed is that even our credit cards that require a PIN here work without the PIN in France. That's reduced security I never wanted.

    REPLY

    Yogesh Sapkale

    In Reply to Mohan Sivanand 5 months ago

    Thanks for your comment, Sir.

    Unfortunately, there also is an issue of security with PIN. As every security expert keep saying PIN numbers must be changed periodically. But since the option is only in four-digit, making strong PINs is out of question for several users. During my financial literacy workshops, I found some of the attendees even writing PIN on the ATM card covers!

    In January 2017, a friend of mine lost about Rs80,000 in minutes when somebody withdrew this sum from an ATM. The ATM card and its PIN were in my friend's possession. It took him almost 10 months and numerous calls, emails and letters to the bank, filing a complaint with the police and, finally, help from Moneylife Foundation, to retrieve the amount.

    Point is nothing is really secure. Use of EMV chip and PIN offer some kind of protection. However, this is also prone to frauds. When people use their card on infected switches or ATMs, there is a high probability that their data will be compromised, which was observed in the 2016 case where over 30 lakh ATM cards issued by prominent banks were found compromised.

    In addition, contactless card is just one of the options provided by the card issuers. Whether to use it or not is entirely up to the customer. Having said, if the customer is not comfortable using contactless card, s/he can always use the swipe and PIN method for payments everywhere.

    For the France scenario, I would suggest you to contact card issuer in India to check the option for mandatory PIN & OTP.

    Vinay Chaudhari

    In Reply to Yogesh Sapkale 5 months ago

    Customer choice in use of contact less card is an illusion. For example, ICICI bank and Citi bank now issues only contact-less cards in certain categories. If you ask for non contact-less card, you will be told that this is strategic decision and either you accept contact less card or don't take it. Further, if you ask to reduce the Rs 2000 limit for contact-less transaction or ask to disable the contact-less feature then surprise, its not possible. I have fought hard with ICICI bank but in vain. In fact, I have even written to RBI ombudsman pointing out that banks should provide way to reduce transaction limit as warranted by its own circular on contact-less card but it has rejected the same on technical grounds.

    Yogesh Sapkale

    In Reply to Vinay Chaudhari 5 months ago

    Thanks for your comment. As I keep saying, contactless card is just one of the options provided by the card issuers. Whether to use it or not is entirely up to the customer. Having said, if the customer is not comfortable using contactless card, s/he can always use the swipe and PIN method for payments everywhere.

    Point is, nobody is forcing you for either using contactless card or having one. You can get your card changed (there may be some charges for changing the category and cost of card) to EMV Chip card from contactless.

    Ashok N

    In Reply to Yogesh Sapkale 5 months ago

    Yes, nobody is forcing me. But when RBI says there should be provision to reduce the transaction limit and/or number of contactless transactions, why isn't ICICI providing it? Why are contactless cards default option?

    As I said I still use my contactless card, but very careful not to take it out if I intend to go by public transport or to crowded places. There is potential loss of 2000 rs apart from cash.

    Yogesh Sapkale

    In Reply to Ashok N 5 months ago

    Thanks for your comment. No one can really be behind you holding their reader machine near your pocket in a public transport or at a crowded place. The system does not work that way. Also all readers have ID number and are given to merchants after due scrutiny. Contactless card readers are not easily available like the magnetic card skimmers, so nobody will come behind you in public transport or crowded place with it.
    ICICI Bank does provide a lot of options for debit cards and you can chose one that comes with only EMV chip. Do check it out on ICICI Bank site https://www.icicibank.com/Personal-Banki...

    Ashok N

    In Reply to Yogesh Sapkale 5 months ago

    Hello Yogesh ji,
    Thank you patiently replying to all comments. You misunderstood me. By public places or crowded places, I mean wherever chances of pocket getting picked is higher. Always I have been saying the same. There is potential loss when the card is PHYSICALLY lost. This is not the case with emv card.

    I know card cannot read when it is inside pocket.

    Abhijit Kanjilal

    5 months ago

    saves seconds but risk starts if misplaced or stolen. Not a recommended option.

    Arpita Padiyar

    5 months ago

    Most pos don\'t show us the amount typed before flashing the card. Getting refund for wrongly entered amount is difficult. also does bank take liability in case of theft. A thief may flash the card at several places for less than 2k before we come to know. this card is like 2k note.

    REPLY

    Yogesh Sapkale

    In Reply to Arpita Padiyar 5 months ago

    Thanks for your comment. However, every merchant I had done transactions with has told me the bill amount upfront. Several have two displays that show the total amount for the bill. If its not there, then you can file complaint against the merchant with the service provider (bank).

    Ashok N

    5 months ago

    I do use a contact less credit card. But I feel it is less safer since if lose the card, it can be used *without pin* till the time we realize the loss of the card and block it. I definitely don't carry the card when I am travelling by public transport.

    Also though it is said that the banks have to provide for restricting its usage (number of transactions per day, or maximum amount per transaction), I haven't been able to see this provision on ICICI bank site.

    REPLY

    Vinay Chaudhari

    In Reply to Ashok N 5 months ago

    There is no way to reduce transaction limit on contact less card or to disable the feature. I have learned after fighting hard with both ICICI bank and citi bank.

    Arpita Padiyar

    In Reply to Ashok N 5 months ago

    i have kept the card at home not using it unless safe guards are provided. bank may treat 2k as small amount but for common man it is not.

    Kalyanasundaram Srinivasan

    6 months ago

    Contactless card is totally unsafe ,and to make the card transactions safe card issuing company should give an option to the card holder to temporarily pause the contactless transactions of his card. The card holder at his liberty should be able to choose between contactless operations or pin based operations for his contact less card.

    REPLY

    Yogesh Sapkale

    In Reply to Kalyanasundaram Srinivasan 6 months ago

    Thanks for your comment. Kindly understand, nobody is forcing you to get and use a contactless card. It is fully your choice, whether to use it or no. Also at the billing counter, you can ask the person to swipe your card instead of tapping it on to the reader. This way you can insert your PIN to validate the transaction.

    Aditya G

    6 months ago

    This is great! I'm all in favour of convenience, as long as user knows the security aspects & workflow in case of compromise i.e. keep that SOS number in handy!

    Keying the PIN such a hassle, and I need those precious seconds of my life back, if I could, if there was a time machine. I reckon I would have lost at least 3-4 days of my life just keying the PIN after PIN over the last 20 years. Ugh!

    Contactless and wallets are the way to go for the future. Next is Apple/Samsung Pay. This has to go mainstream. I'm surprised why India has not adopted Kenyan model of m-pesa model for making payments over mobile? It seems so seamless. Or maybe we did, and it failed? IDK.

    REPLY

    Yogesh Sapkale

    In Reply to Aditya G 6 months ago

    Thanks Aditya for your comment. For other payment instruments, the issue could be non-existent grievance redressal. There are several cases, where the customer is made to run from pillar to post for payment is made from their account into an e-wallets or mobile wallet. This could be one of the reasons. But as you said, with bigger players with international standards entering into Indian market, things may become better.

    Uday Thakurdesai

    6 months ago

    Just as cash can be pickpocketed, so can the card. In which case, the thief can literally steal the entire balance. The card holder should be given an option to enforce the use of PIN should he want it. Those who are ready to bear the risk can be perfectly comfortable with the existing system. Why enforce it on those who do not want it?

    REPLY

    Yogesh Sapkale

    In Reply to Uday Thakurdesai 6 months ago

    Thanks for your comment. Kindly understand, nobody is forcing you to get and use a contactless card. At the billing counter, you can ask the cashier to swipe/insert your card instead of tapping it on to the contactless reader. This will allow you use your PIN to validate the transaction.

    SURESH NAIR

    6 months ago

    The probability of misuse very much exists! For example if person is keeping his contactless card in his purse which is in his back pocket all the scamster has to do is to approach the person from behind and ensure that the card reader is 4cm from the card! And before you know it, you have scammed for Rs 2000! The same with cards in handbags etc!

    REPLY

    Yogesh Sapkale

    In Reply to SURESH NAIR 5 months ago

    Thanks for your comment. No one can really be behind you holding their reader machine near your pocket. The system does not work that way. Also all readers have ID number and are given to merchants after due scrutiny. Contactless card readers are not easily available like the magnetic card skimmers.
    As far as misuse is concerned, it is the same case with all types of payment instruments. Point is, use contactless card only if you are comfortable for payment transactions of up to Rs2,000. If you are not comfortable, then you can use swipe/insert and PIN method for all transactions.

    Arun Kumar Saha

    In Reply to SURESH NAIR 5 months ago

    This is good point. I think if a contactless card is accompanied with some sort of thumb reader where it force card holder to hold his card physically at the time of tapping, would be a way for improvement

    SANDESH PAWAR

    6 months ago

    What if we loose a card. I think is the biggest factor amongst the consumers.

    REPLY

    Yogesh Sapkale

    In Reply to SANDESH PAWAR 6 months ago

    Thanks for your comment. Your apprehension is applicable to all types of payment instruments, including chip cards or even cash in your wallet. Also as applicable to all other cards, you need to report the loss to the card issuer and block it from further misuse.

    Vivek Sinha

    In Reply to Yogesh Sapkale 4 weeks ago

    Dear Sir,
    Why the bank has to force someone to use contactless credit card.
    It should be totally choice of the customer. We are paying for the service.
    Here As My case ICICI is forcing me to use contactless credit card or close the card that's not how bank should work.
    What if I lost my card and I am unaware about it.
    If any fraud happen bank takes ages to refund the amount.
    Now a days bank are mostly concerned towards profit Making not the service.

    Ashok N

    In Reply to Yogesh Sapkale 5 months ago

    And till the time we realize the loss of the card and block, it can be misused. This is not the case with Pin based cards.

    Yogesh Sapkale

    In Reply to Ashok N 5 months ago

    Thanks for your comment. You may want to read...

    "ATM, Debit, Credit card frauds: What you need to know and how to protect your money"
    https://www.moneylife.in/article/atm-debit-credit-card-frauds-what-you-need-to-know-and-how-to-protect-your-money/48648.html

    HDFC disburses subsidy to over 1 lakh first-time homebuyers under PMAY
    HDFC Ltd, India’s premier housing finance company has disbursed subsidy amounting to over Rs2,300 crore benefitting over 1,04,000 families under the government’s flagship housing scheme - Pradhan Mantri Awas Yojana (PMAY).
     
    The corporation has approved Rs22,136 crore of home loans under the Credit Linked Subsidy Scheme (CLSS) to homebuyers belonging to the economically weaker section (EWS), Low Income Group (LIG) and Middle Income Groups (MIG), HDFC said in a statement. 
     
    The housing finance company has partnered with the Ministry of Housing & Urban Affairs and the National Housing Bank to work towards the government’s goal of “Affordable Housing for All”
     
    “The government’s PMAY scheme is a growth accelerator programme that aims to provide affordable housing to people in the country. The thrust on housing is a recognition that a rapidly growing country like India with a large young population needs more affordable homes. The government has rightly incentivised all constituents in the housing chain – be it developers, borrowers and lenders in order to make India a property owning democracy,” said Renu Sud Karnad, Managing Director, HDFC Ltd. She further added that people should take advantage of this scheme at the earliest as the ones for the MIG category are only available until 31 March, 2020. In this regard, HDFC has also engaged with developers and channel partners to reach out to eligible beneficiaries. 
     
    During 2018-19, the housing finance company has approved 37% of home loans in volume terms and 18% in value terms to customers from the EWS and LIG segment. On average, the corporation has been approving 8,600 loans on a monthly basis to the EWS and LIG segment, with such average approvals at Rs1,460, they said in a statement. The average home loan to the EWS and LIG segment stood at Rs10.1 lakh and Rs17.5 lakh respectively. 
     
    CLSS, which was introduced in June 2015 under the PMAY for EWS, LIG and extended to MIG from January 2017, gives borrowers an interest subsidy of 6.5% per annum for loans up to Rs6 lakh for EWS and LIG category (annual household income up to Rs6 lakh). Interest subsidy of 4% and 3% are provided for loans up to Rs 9 lakh and Rs 12 lakh, respectively, for MIG category for a maximum tenure of 20 years. 
     
    The effective subsidy to customer is in the range of Rs2.30 – Rs2.67 lakh on a 20 year term, receivable upfront. The schemes for MIG are valid up to March 32, 2020, while the plans for EWS/LIG are valid up to March 31,2022.
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    Personal Finance   Sponsored Post
    How to Accept Credit Card Payments — The Ultimate Guide
    If you are a growing business or want to widen your reach by tapping into the online market then you must be able to accept credit card payments. By accepting credit card payments your business can witness up to a 40% boost in sales. So, put the right software and hardware in place so as to ensure that your client's data security is maintained while making online credit card payments. 
     
    You can also choose a credit card of your own, such as the Bajaj Finserv RBL Bank SuperCard. This card offers your business the ability to overcome short monetary requirements, such as clearing supplier dues or buying needed inventory, with instant financing. You can save money with each purchase and convert purchases above Rs.3000 into easy EMIs. This apart, you can get the power and benefits of ‘4 cards in 1’ with this card and use it as an EMI card, a loan card, a cash card and a credit card, as per your needs. You can avail an emergency interest-free credit card loan on your existing credit limit and withdraw interest-free cash from ATMs. Apart from this, you can earn rewards, cashbacks, and discounts for a range of purchases and transactions.
     
    In order to accept credit card payments, you should begin by following these steps.
     
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    You can set up a merchant account at your local bank. This will allow you to accept, process, and receive funds from credit cards and debit cards payments made online or using the card machine installed in-store. This merchant account facilitates the movement of funds from the cardholder’s account to your business account.
     
    Selecting a merchant service provider
     
    When selecting a service provider, you must consider the tools and solutions offered by various providers. Choosing the best on offer will ensure they help you run your business transactions smoothly. Also, while selecting a provider make sure that they give you access to the best customer support in a timely fashion. Know how the support will be delivered, like through text, e-mail, chat, online documentation, etc. A good service provider will also ensure that you meet and maintain the security standards laid down by the Payment Card Industry (PCI), which is the central authority across the globe monitoring all payment-related activities. Also, while selecting the provider, check how they are charging you for your online credit card payments. Based on pricing, the two most common providers are tiered pricing merchant service providers and interchange plus merchant service providers.
     
    Now that you have understood the basics of setting up a merchant account and selecting a provider, read on to know how online payments are enabled. 
     
    How to accept credit cards for mobile sales
     
    To accept payments via credit cards through mobile, you will need a mobile credit card reader set-up in your smartphone or tablet. Also, to start with, you must ensure that your chosen merchant account is ready to handle mobile payments. The card reader connects your smartphone or tablet to your merchant account, that in-turn allows you to accept credit cards of every kind, whether they are chip cards or electronic strip cards that you need to swipe, e-wallets or contactless cards. The risk of fraud for mobile sales is lower as you can see the identity of the holder along with the physical card or information and thus the cost of maintaining this service is lower too.
     
    How to accept credit cards for online sales
     
    This requires you to have a secured e-commerce platform enabled with a proper checkout arena and a secure payment gateway channel. You can choose an all-in-one solution from your service provider that includes a payment gateway too. The gateway secures your clients’ credit card information and sends it over the internet for your approval upon which the transaction is completed. The funds are deposited generally within 1 or 2 days directly into your merchant account. Since online sales have a higher risk factor as it involves verification and payment gateway assessment, the fee for such a credit card payment is relatively higher. 
     
    How to accept a credit card for in-store sales 
     
    To accept credit cards for in-store sales you require a retail point-of-sale system, which is commonly known as a POS. This payment system allows your customers to complete payment for their purchases using their cards in physical form. Also, you on the other hand, can not only accept cashless payments, but basis the system track inventory, manage staff, connect in-store and online sales and do much more at the backend. In order to put this credit card system in place, you will need a credit card reader or a card machine. 
     
    Equipped with this payment guide, boost your business with the ability to accept credit card payments. As a business owner, you can also take a step towards empowering yourself by applying for a credit card like the SuperCard. To begin with, check your pre-approved credit card offer today and enjoy the benefit of 4 cards in 1 right away!
     
     
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