Two Technologies behind Contactless Payment

Two Technologies behind Contactless Payment


The daily challenge of always having to carry a bulky wallet stuffed with credit cards, membership cards, and loyalty cards will soon be solved. The worldwide adoption of contactless payment is changing how we make daily purchases and manage our financial resources. The two technologies behind the changes are EMV (abbreviation for Europay, Mater and Visa) and NFC (Near Field Communication), both are implemented by innovative chips to some extent.


EMV is an “open-standard set of specifications for smart card payments and acceptance devices” managed and maintained by EMVCo. EMVCo is owned by American Express, Discover, JCB, MasterCard, Union Pay, and Visa. It is also supported by dozens of banks, merchants, and vendors to facilitate interoperability and acceptance of secure payment transactions.


Up to now, any credit card with a chip installed is an EMV chip card. By embedding a microprocessor in the card, EMV is able to provide improved security and finer control of offline credit card approvals. The EMV system uses dynamic, one-use data that is generated for each transaction, which makes it almost impossible for hackers to clone card information like what was done with magnetic cards. To ensure that offline transactions are authentic and secure, EMV uses public key cryptography to perform payment data authentication through Static Data Authentication (SDA), Dynamic Data Authentication (DDA), or Combined Data Authentication (CDA).


As of June 2015, EMV card is widely used around the globe:


(Image from: http://www.emvco.com/about_emvco.aspx?id=202)

For countries that have adopted EMV, the results are very positive. Canada, started the adoption of EMV in 2007 and has seen a big decline of debit card fraud from $142 million in 2009 to $38.5 million in 2012. Also, the UK Cards Association reported that “Fraud on lost and stolen cards is now at its lowest level for two decades and counterfeit card fraud losses have also fallen and are at their lowest level since 1999. Losses at U.K. retailers have fallen by 67 per cent since 2004; lost and stolen card fraud fell by 58 percent between 2004 and 2009; and mail non-receipt fraud has fallen by 91 percent since 2004.”


In addition to EMV card, mobile payments, which are powered by NFC (near field communication), is another area where we are experiencing innovation. If you have a Smartphone, you probably already have the function where you can make a payment on your phone. Apple Pay and Google wallet were the two most famous mobile payment channels and they are the driving force behind the popularity of NFC devices.  Since the first Smartphone with NFC was released in 2006, the field has experienced an exponential increase in sales. In 2014 the NFC SIM increased by 69%[8].


The NFC allows a device to create a radio frequency current that can communicate with another NFC-equipped device. It also allows two-way communication where two devices can read each other’s data. This is not a new technology, but it’s growing its popularity into mainstream products like Smartphones. Moreover, NFC is limited to communication within 4 inches. This extremely short distance makes it difficult for hackers to steal information. Other benefits brought by NFC includes short transaction time, all-in-one e-wallet, and low power consumption.


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