Mobile Payments: What is a Contactless Chip Card?

What is a Contactless Chip Card?

Contactless chip cards are standard credit cards with an embedded contactless chip. Optionally, a MagStripe is also provided?for backwards compatibility.?These cards require?no physical contact with the point-of-sale (POS) terminal. To make a payment, the consumer holds the contactless card in close proximity (less than 2-4 inches) to the merchant POS terminal and the payment account information is communicated wirelessly?via?Radio Frequency (RF).

Radio frequency waves are the frequencies within the electromagnetic spectrum associated with radio wave propagation. Many wireless communications technologies are based on RF, including radio, television, mobile phones, wireless networks and now, contactless payment cards and devices. Don’t confuse this RF with RFID technologies used in manufacturing, shipping and object tracking. Those are?designed to operate over long ranges (in the order of 25 feet) and typically don’t have built in security and privacy. On the other hand, the contactless cards that are used for payments are desgined to operate at a short range and come built-in with security and cryptography capabilities.

In the image above, the logo marked on the right hand side represents the?universal contactless symbol. If you see this logo on your credit card, you can be sure that it supports?contactless payments. Similarly, POS devices that support contactless payments?prominently display the same logo to advertise their capability for the same.

Typically, when you make a payment with contactless cards, you are not required to enter a PIN or?autograph your signature. This is intentional because, one of the most touted value-add features provided by a contactless card is?fast checkout times. Consequently, they are sometimes also referred to as Tap & Go?cards.

In the context of mobile payments, when you use a NFC mobile device (like Android or Blackberry) to Tap & Pay at the point of sale, you are actually using the same underlying technology as the Contactless Chip Card. The NFC controller chip?inside the mobile device is put into card-emulation mode. In this mode, the NFC chip behaves like a Contactless chip card thereby?transforming your mobile phone?into a contactless credit card.

Since mobile phones are way more powerful than a plastic card, they can hold as many cards as you?want and the NFC chip will be able to simulate?any or all of them. This essentially turns your mobile phone into a virtual mobile wallet. Now you know where the concept of Mobile wallets origintated from.

Mobile Payments Blog Series

Welcome to the Mobile payments FAQ and?not so FAQ?series?and you are on FAQ?#7.?The idea behind this series is to?share and learn as much as possible about the field of mobile payments.?If you like, you can read all of the FAQs on the Mobile Payments?category or by visiting the Table of contents page.

Ganeshji Marwaha

I spend my days as the Director of Technology for Mobility practice and help my clients design enterprise and consumer mobile strategies. Mobile Payments, Digital Wallet and Tokenization technologies are my areas of specialization