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Contactless Payment: A Valuable Application of RFID Technology

  • Akansha Sharma
  • Aug 21, 2023
  • RFID
Contactless Payment

The exchange of goods and commodities has been a foundational element of human civilization. Started with the barter system, which then moved onto the advent of currency. This led to an exchange of money for goods & services, which led to the creation of the market. From there we moved on to digital currency, eliminating the need for using cash everywhere. One such system of transaction currently, is contactless payment.

And radio frequency identification technology has played a huge part in facilitating contactless payment between businesses and customers. So, let’s talk more about it.

Advent & History of Contactless Payment

The earliest example of contactless payment came around during the mid-90s. In the year 1995, authorities in Seoul offered launched the first iteration of a contactless payment system known as the UPass. A system that allowed passengers to pay for public bus transit system, using contactless passes. This was later joined by a system called Speedpass, by the company Mobil.

Speedpass worked pretty much the same way as UPass, however, it worked for petrol pumps. This system consisted of a FOB that could be recharged and used to pay for petrol or diesel. Nowadays, you can see contactless payments almost everywhere. From big e-commerce businesses like Amazon to roadside vendors, using QR code-based payment.

However, today we will focus on contactless payment systems operating using RFID technology.

How RFID Technology Enables Contactless Payment?

RFID is not the only method of initiating these transactions, however, they are one of the most popular means of doing it. For the purpose of contactless payments, we generally employ the use of smart cards.

These smart cards consist of an RFID inlay inside of them, that can communicate with NFC readers at the POS checkpoints. The best example of such a system is contactless credit/debit cards. If you’ve received a credit card in the past 3 to 4 years, then there is a high probability that it has a Wi-Fi symbol on top of it. This symbol denotes that your card has contactless payment capability. 

The card consists of an RF inlay sandwiched safely between the two layers of PVC that form the card surface. The inlay is programmed with the account information of the owner of the card. At POS, the card machine has a small NFC reader inside of it, that uses the same encryption as bank cards. During a transaction, the billing employee just needs to tap the card surface on the machine to initiate the transaction.

Benefits of RFID Contactless Payments

There are a lot of benefits of using RFID in contactless payment than using other methods of monetary transactions including cash. So, let’s check out the reasons that everyone to shift to contactless payment.

(A). Quick Transactions

The most common and popular reason that people prefer contactless transactions is the speed at which the exchange takes place. Unlike cash or putting in the pin, the customers do not have to worry about looking for change or entering the wrong pin, it’s just touch & go. In addition, to customers, contactless payment is also preferred a lot by businesses. And especially, during peak hours, as anything that can streamline the POS traffic, helps the business operate smoothly and avoid errors/thefts.

(B). Security Measures

Security is always the biggest concern in people’s minds when it comes to money. Nobody likes to lose their hard-earned money, and rightly so. Keeping a wad of cash in your pocket or wallet, always have a risk of getting pickpocketed. Aside from that, the notes may get torn or damaged, or wet during the rainy season, it’s all just too much of a hassle.

With contactless payment systems, all you need is you slim trusted card or in some cases, not even that. Reducing the risk of theft, in addition, these cards are also encrypted. And most of the time, you can set a particular transaction limit that can be done using the contactless method. Allowing you to limit the fallout/damage in case someone steals your card.

(C). Compatibility

The greatest reason for the popularity of RFID technology is its ability to integrate with other machines and tech. In the case of contactless payment, some smartphones even allow users to convert their phones into a FOB for their bank account. Meaning that those users don’t need to even carry their cards, they can use the in-built NFC communicator in the phone to conduct contactless payments.

(D). Enhanced Experience

With all these functions and features, contactless payments with the help of RFID, allows users to have a better customer experience overall. They allow users to conduct transactions safely and in a fraction of the time. Eliminating the need to stand in long queues during checkouts and making the experience pleasant.

(E). Branding & Promotion

Contactless Payment methods allow banks and other brands to promote themselves by providing offers, discounts, and added-value services. This not only promotes the brands but also gives the customers more of an incentive to use the contactless payment method.

(F). Reduces Devaluation

Lastly, this is not only a point that works for just contactless payment, but any cashless transaction. Hard cash in itself gets devalued with time, due to inflation. That is why it is advised to keep your money invested, where it can grow and at least keep its purchasing power the same. Banks provide the same function; a savings account provides and interest on the money. Contactless payment reduces the need for users to take money out of their account and further reduces its value or reduces the need for withdrawal charges.

Frequently Asked Questions

Q1. How is RFID used in contactless payment?

When it comes to contactless payments, the use of Radio Frequency Identification Technology is very popular. Generally, the banks put in an RF inlay inside the Credit/Debit cards to make them contactless enabled.

Q2. Do contactless cards need RFID protection?

Contactless cards operate using near-field communication technology. Meaning that they only have a communication range of a few centimeters. Therefore, they do not require any additional security features or protection. However, just to be safe, manufacturers, usually keep the data encrypted to prevent it from getting phished or cloned.

Q3. What is the frequency of contactless RFID?

Most contactless RFID devices operate using HF radio signals. To clarify, HF stands for High Frequency, these devices communicate using radio waves at the frequency of 13.56 MHz.

Disclaimer: The information presented here is for general information purposes only and true to best of our understanding. Users are requested to use any information as per their own understanding and knowledge. Before using any of the information, please refer to our Privacy Policy and Terms and Conditions.

  • Created on Aug 21, 2023

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