Contactless Payment

© Family Economics & Financial Education – January 2007 –– Financial Institution Unit – Contactless Payment - 2 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona G1 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

© Family Economics & Financial Education – January 2007 –– Financial Institution Unit – Contactless Payment - 3 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona G1 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

© Family Economics & Financial Education – January 2007 –– Financial Institution Unit – Contactless Payment - 4 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona G1 Obtaining a Device  Contactless payment devices are distributed through financial institutions and connected to issuers such as Visa

© Family Economics & Financial Education – January 2007 –– Financial Institution Unit – Contactless Payment - 5 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona G1 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

© Family Economics & Financial Education – January 2007 –– Financial Institution Unit – Contactless Payment - 6 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona G1 Growth  Since 2005, millions of contactless payment devices have been distributed The rate of deployment is the highest ever observed for emerging payment products

© Family Economics & Financial Education – January 2007 –– Financial Institution Unit – Contactless Payment - 7 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona G1 What are the Benefits?  Issuer American Express, MasterCard, Visa  Consumer Individual making the purchase  Merchant Store  Brainstorm two benefits for each group

© Family Economics & Financial Education – January 2007 –– Financial Institution Unit – Contactless Payment - 8 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona G1 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

© Family Economics & Financial Education – January 2007 –– Financial Institution Unit – Contactless Payment - 9 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona G1 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

© Family Economics & Financial Education – January 2007 –– Financial Institution Unit – Contactless Payment - 10 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona G1 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

© Family Economics & Financial Education – January 2007 –– Financial Institution Unit – Contactless Payment - 11 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona G1 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

© Family Economics & Financial Education – January 2007 –– Financial Institution Unit – Contactless Payment - 12 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona G1 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

© Family Economics & Financial Education – January 2007 –– Financial Institution Unit – Contactless Payment - 13 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona G1 Future Predictions?  How will contactless payment or other technologies advance in the years to come?  Brainstorm three possibilities with your group.  Share responses.

© Family Economics & Financial Education – January 2007 –– Financial Institution Unit – Contactless Payment - 14 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona G1 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

© Family Economics & Financial Education – January 2007 –– Financial Institution Unit – Contactless Payment - 15 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona G1 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

© Family Economics & Financial Education – January 2007 –– Financial Institution Unit – Contactless Payment - 16 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona G1 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

© Family Economics & Financial Education – January 2007 –– Financial Institution Unit – Contactless Payment - 17 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona G1 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

© Family Economics & Financial Education – January 2007 –– Financial Institution Unit – Contactless Payment - 18 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona G1 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

© Family Economics & Financial Education – January 2007 –– Financial Institution Unit – Contactless Payment - 19 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona G1 Summary  Contactless payment – new payment method  Benefits for issuers, consumers and merchants  Safety features  Protecting one’s identity