London gets ready for contactless payments

Chip Mulligan
The Inquirer
Nov. 28, 2006

DETAILS WERE ANNOUNCED of the initial London roll out of a new wave of contactless debit cards, credit cards and pre-pay cards for payments under Ł10.

An extension to the existing Chip and PIN EMV network, Maestro / MasterCard’s PayPass and Visa's contactless system will allow users to pay for small goods such as rail tickets, newspapers and beers by waving their card in front of an RFID sensor on a point of sale or vending machine.

Watch out for this logo to start appearing around you soon.

While, initially, this might sound open to wide scale abuse, with robbers able to swipe the card and pay for things without challenge, the maximum transaction size of Ł10 will help to minimise the risk, and each card will come with built-in counters that will only allow a certain number of contactless payments to be made before a PIN must be entered.

This counter is also reset every time a standard Chip and PIN transaction (so anything over Ł10) is made, so the card providers believe that a PIN will only be required in practice every one out of 20 times the card is used.

Initial trials in Scotland, and elsewhere across the world, have shown very positive feedback from customers and merchants alike, with cardholders liking the ease-of-use and speed, and merchants the reduced hassle, especially having to haul less cash around at the end of the day.

The London roll out, itself, will be quite an ambitious affair, with over half a million new cards issued, and 4,000 updated chip and pin readers with built-in RFID sensor sent to over a thousand shops within the central city area and Docklands, starting from September 2007.

By the beginning of 2008 it will start to be rolled out across the whole of the UK, provided any bugs that have been shown up in the initial launch have been ironed out.

Fortunately, and unusually for a banking standard, cross-compatibility has been well thought out, and cards should be capable of being used across the world.

APACS expect that by 2011, 70% of debit cards and 45% of credit cards will have been converted to support contactless payments.

Of course, security is a rather major concern. Given that RFID enabled passports have already been compromised to release private data, one hopes that the credit cards will be slightly more secure. The banks, credit card companies and acquirers alike are all aware of what the stakes are, but initial signs are that around 30% of users do not trust the system, however this is before the marketing bombardment that we should all expect.

One thing is certain: the government and banks are serious, and see this as a war on cash. Official figures estimate that handling of physical cash is a Ł4 billion drain on the economy. We can only hope that it goes slightly better than their war on terror.