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What Are Contactless Cards And How Do They Work?


As technology advances, we see new ways in which it is adapted in our daily life. Contactless payment is one such advancement in the field of banking that has been around for quite some time. This mode of payment allows users to pay for their purchases with a debit, credit or smartcard using the RFID technology or near-field communication (NFC). The transaction limit in terms of value using these cards are, however, lower.


What are contactless cards?

What are contactless cards?

They are physical cards with built-in radio frequency module which means that these need not be swiped (like in case of magnetic stripe cards) or be read by a chip reading POS device, but one needs to just hold it close to an RFID reader at the store.

The mechanism is similar to the employees' ID card sensing used by companies to provide access to the premises. These cards make payments more convenient than the traditional debit or credit cards as they do not require entering a PIN or making signatures.

Contactless cards in India

Contactless cards in India

The first contactless card in India was launched back in 2015. Since then, there has been an increase in the necessary infrastructure required for the card's utility.

In an interview in December 2018 by T R Ramachandran, Group Country Manager for Visa in India & South Asia with the Hindu said that India has over one million such terminals.

These are accepted by large retail chains like Big Bazaar, Reliance Retail, and PVR.

Features of contactless cards in India

Features of contactless cards in India

  • These come with a WiFi-like symbol on them.
  • Payments using contactless cards can only be made at stores that accept this mode of payment.
  • The transaction processing time is lower than a regular debit/credit card payment.
  • This "tap and pay" option is not available on transactions valued over Rs 2,000.
  • It works in close proximity only, that is if the card is held 4 cm away or closer.
  • You cannot make an accidental payment as the cashier at the store will have to enter the amount in the card machine before you wave the contactless card at the machine.
  • No PIN or signature is required for transactions valued below Rs 2,000.
  • A unique transaction code is generated that prevents paying for the same purchase twice.
  • Only authorized machines can read the cards, preventing frauds.
Fraud risk

Fraud risk

There has been an increase in the number of contactless card users in India and reports suggest there have been no reported cases of frauds using these since its launch.

However, one should note that there is no option to deactivate the contactless feature of the card as these chips are built-in. Some banks are working on the option but it isn't available in the Indian market yet.

In order to have multiple layers of security on these cards, there are five aspects that ensure that money is not lost from your bank account:

  1. It only reads on an authorized RFID or NFC machine
  2. It only reads when held very close the machine
  3. The payment is only processed with the cashier registers a purchase in the machine and enters the amount
  4. The transaction amount is capped at Rs 2,000 (as per RBI rules), thus disallowing the possibility of losing large sum, if fraud were to take place
  5. The bank covers the customer's losses and is liable to pay the complete amount in case of a fraud that was not caused by negligence on account of the user.

Note: Do not leave your card unattended at a public place. Since the usage of the card requires no PIN, signature or proof of identity, these can be stolen and misused to make multiple transactions below the value of Rs 2,000. If stolen, report to the bank or issuer immediately for cancellation. Best not to carry the card along with you on occasions where you do not plan on using it. Also, make sure to check your bank statement regularly for any fraudulent activities.

How can you apply for a contactless card?

How can you apply for a contactless card?

This service is available with many commercial banks in India like SBI and Kotak Mahindra that issue contactless Visa cards. These also come with offers on payments. Free tickets to movies or discount on payments for fuel are available with some banks.

You can directly contact your bank to apply for one. These are also issued by some retail merchants for exclusive purchases at their stores and premium points.

Read more about: contactless cards
Story first published: Friday, April 12, 2019, 13:59 [IST]
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