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Contactless payments on the rise

By Jessica Anne Wood

The use of contactless payment methods is on the rise. This is according to First National Bank (FNB) who have been issuing contactless enabled cards since May 2015 and there are already over 1 million cards on the market.

“FNB has always been at the forefront of payment technologies. With all our debit and credit cards issued now enabled with contactless technology and a number of additional merchants coming onboard, we are expecting to see good growth in contactless transactions,” said Chris Labuschagne, CEO of FNB Credit Card.

Contactless payments

According to FNB, there are two benefits of this payment method, namely convenience and safety. This new method of payment offers added protection for the consumer’s information as the card does not leave the clients hand during the transaction process.

Labuschagne explained: “The transaction requires information from the plastic and the merchant device in order to affect a transaction. The information passed during this contactless process by itself is not sufficient to replicate further transactions without having the card to decrypt the information. A PIN is required as added security for either high value transactions or after a certain number of transactions. This protects the client and the bank in the event of the credit card being stolen or lost.”

Furthermore, FNB noted that it will also protect the customer against fraud or loss if the card is lost or stolen, as long as the customer takes reasonable precautions to protect the card and immediately report it missing.

In addition, Labuschagne pointed out that payments are about a third faster than normal PIN-based transactions, reducing the amount of time spent in queues.

Security of the payments

On top of the security features mentioned above, the cards also include encryption technology. This protects the card’s contactless data from reproduction. As previously stated, an additional security feature is that after a certain number of transactions, cardholder’s are required to enter their PIN to verify the transaction.

There is currently a limit of R200 for PIN-less transactions for clients wanting to use this payment option. For transactions greater than R200 customers will be required to ‘tap’ and enter their PIN code.

“Contactless payments are useful for smaller, everyday purchases, such as a morning coffee or nipping to the shops for bread and milk. These purchases are usually made on the ‘fly’ where quick, painless payment options are very welcome,” stated Labuschagne.

Participating merchants

At present there are only a select number of participating merchants who allow customers to make use of contactless payments. These include:

  • Engen
  • Shell
  • Vida e Café
  • McDonald’s

In addition to the above, there are a number of individual coffee stores and merchants that also offer this payment service.

Are other banks offering the same service?

Justmoney contacted South Africa’s other big banks, namely Standard Bank, Absa and Nedbank.

Standard Bank announced in 2012 that all of its Gold and Titanium Standard Bank-branded credit and cheque cards would be issued with the tap-and-go payment method. At the time, Sugendhree Reddy, head of personal markets at Standard Bank South Africa, said: “The introduction of this new payment method forms part of Standard Bank's consistent focus on providing customers with value in banking. There are evident trends internationally and locally driving consumer preference towards fast, convenient and secure payment methods. 

“The new tap-and-go cards are linked to a customer's bank account, allowing for funds to be deducted directly from their account. Unlike many systems currently available, customers don't have to pre-load cards with money to use this method of payment.”

The Standard Bank system works as follows: “The cards carry the MasterCard PayPass logo and have antennas imbedded in them. The antenna allows cardholders to pay at point-of-sale devices displaying the same PayPass logo as their card by simply tapping the card on the terminal. Holders of these credit and cheque cards do not need to give the card to the cashier, enter a PIN or sign a slip for payments under R200. To ensure security, a PIN will be required for higher amounts.”

Chris Wood, head of emerging payments, strategy and regulation at Nedbank, noted: “While Nedbank acknowledges that contactless cards are not a new innovation in market, the technology is relatively new in the South African context as consumers are still largely used to paying with chip and pin. Nedbank’s journey to contactless enablement involves simultaneously rolling out its contactless card acceptance network through its point of sale (POS) infrastructure. To this end, the bank has enabled 26,250 POS terminals for contactless acceptance to date.”

Furthermore, Wood revealed that Nedbank has partnered with Gautrain, and the link with OR Thambo is already live. “The legislated limit at the moment across all contactless cards is R200, except where the issuing bank chooses to accept a higher payment threshold, at which point the customer can tap their card and insert a pin for further verification.”

Wood added: “Nedbank has begun the process of distributing key cards across its broad base of plastics, starting with Retail Relationship Banking and the Professional segment, as key customers who would adopt this type of technology. A strategy is in place to issue contactless cards across all strategic portfolios over the coming year. Nedbank is already issuing American Express, Visa and Mastercard to its customers as contactless plastics.”

 

Absa had not provided feedback to queries at the time of publication.

 

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