How Do Contactless Credit or Debit Cards Work?
It has been a few years since the Reserve Bank of India (RBI) had allowed financial institutions and merchants to use contactless credit or debit cards for transactions. However, several customers are still apprehensive about using such contactless cards, especially about payment being deducted from their cards for transactions initiated by someone else. 
 
Let us see how these contactless cards work in practice. While everybody refers these cards as contactless, what they really mean to says is, cards that can be connected through wireless technology. Or simply, there is no need to insert the card in to the machine and then type your personal identification number (PIN) to authenticate the transaction. 
 
In contactless card payment transaction, all you need to do is to tap your card on the machine for any transactions valued up to Rs2,000, and wait for the green light or beep sound (for acceptance of payment). That’s it. In addition, as per the guidelines issued by the RBI, you or your bank or the card issuer can limit the amount per transaction or the number of transactions per day. 
 
Contactless card is quite useful for small value transactions. Anywhere you see the contactless symbol at checkout or billing counter, you can simply tap to pay. Many fast food restaurants, petrol pumps, malls, convenience stores, pharmacies, and theatres, among others accept contactless card payments up to Rs2,000. 
 
However, for transactions of over Rs2,000 you will have to use the chip and PIN system, as per the RBI directions. 
 
Now let us see the security angle. According to Visa, one of the global payment network services providers, contactless cards are as secure as any other chip card. "They carry the same multiple layers of security, which ensure that you are safe from fraudulent or unauthorised transactions. Contactless cards work when the card is within 4cm of the card reader and the contactless payment terminal can only process one transaction at a time. Because your contactless card does not leave your hand during the transaction, you remain in control of your card at all times," it says.
 
Many customers who are not aware of this aspect feel that someone can misuse their contactless card and deduct money for transactions not initiated by them. However, this fear is misplaced. As Visa has pointed out, the card remains in the hand of the customer and this system works only when this card is within 4cm to 6cm from the machine. In addition, the cashier at the billing counter will have to put in the amount in the terminal to activate the reader before the card can be tapped. 
 
One thing should be clear here. The contactless card has a built-in antenna that responds to the reader signals emitted by the reading machine and then transmits encrypted signal back to the reading machine through radio waves. So the wallet, which has the contactless card, needs to be placed within 4cm-6cm to complete the transaction. This means you do not need to take out the card and tap it on the reading machine physically. 
 
Also remember, there is no battery in the contactless card so you cannot turn it off.
 
 
Having said that, if you have more than one contactless card, then in such cases, you will have to physically tap the reader with the card. Otherwise, in such case, payment would be deducted from the card that is closer to the reading machine. 
 
In addition, the RBI has issued guidelines for banks and card issuer companies on providing a token that can be used to perform card transactions in contactless mode at point of sale (POS) terminals, or quick response (QR) code payments. The 'token' refers to replacement of actual card details like primary account number (PAN) with a unique alternate code, which would be unique for a combination of card, token requestor and identified device. 
 
These tokens can be used for mobile PoS transactions, in-app purchases or online shopping. Talking about benefits of tokenisation, MasterCard says, “Tokenisation reduces fraud related to digital payments by making transactions more secure by including a dynamic component with each transaction. It takes the security of a physical EuroPay, MasterCard and Visa (EMV) chip and applies it to non-card environments including proximity and internet payments.”
Comments
patelsandeeps435
2 years ago
We need to be very careful to use such contact less credit card or debit card. Hey, but if you want to create a new credit card, then you generate it online immediately from Credit Card Generator.
samintl
2 years ago
The contactless card may be a point of convenience but is greatly susceptible to misuse. Lot of complaints are received by us when the card gets lost and it is easiest to use as no pin is required. This card should be banned. The previous version of CHIP card should be used as one feels some safe due to punching of pin.
Mohan Sivanand
3 years ago
One point this otherwise informative article ignores is loss of card and subsequent misuse for transactions under ₹2000, maybe multiple times. Often, people who lose a card are not aware they lost it for days till they may need the card again. If there's a compulsory PIN it seems so much safer. Another thing I noticed is that even our credit cards that require a PIN here work without the PIN in France. That's reduced security I never wanted.
Yogesh Sapkale
Replied to Mohan Sivanand comment 3 years ago
Thanks for your comment, Sir.

Unfortunately, there also is an issue of security with PIN. As every security expert keep saying PIN numbers must be changed periodically. But since the option is only in four-digit, making strong PINs is out of question for several users. During my financial literacy workshops, I found some of the attendees even writing PIN on the ATM card covers!

In January 2017, a friend of mine lost about Rs80,000 in minutes when somebody withdrew this sum from an ATM. The ATM card and its PIN were in my friend's possession. It took him almost 10 months and numerous calls, emails and letters to the bank, filing a complaint with the police and, finally, help from Moneylife Foundation, to retrieve the amount.

Point is nothing is really secure. Use of EMV chip and PIN offer some kind of protection. However, this is also prone to frauds. When people use their card on infected switches or ATMs, there is a high probability that their data will be compromised, which was observed in the 2016 case where over 30 lakh ATM cards issued by prominent banks were found compromised.

In addition, contactless card is just one of the options provided by the card issuers. Whether to use it or not is entirely up to the customer. Having said, if the customer is not comfortable using contactless card, s/he can always use the swipe and PIN method for payments everywhere.

For the France scenario, I would suggest you to contact card issuer in India to check the option for mandatory PIN & OTP.
Vinay Chaudhari
Replied to Yogesh Sapkale comment 3 years ago
Customer choice in use of contact less card is an illusion. For example, ICICI bank and Citi bank now issues only contact-less cards in certain categories. If you ask for non contact-less card, you will be told that this is strategic decision and either you accept contact less card or don't take it. Further, if you ask to reduce the Rs 2000 limit for contact-less transaction or ask to disable the contact-less feature then surprise, its not possible. I have fought hard with ICICI bank but in vain. In fact, I have even written to RBI ombudsman pointing out that banks should provide way to reduce transaction limit as warranted by its own circular on contact-less card but it has rejected the same on technical grounds.
Yogesh Sapkale
Replied to Vinay Chaudhari comment 3 years ago
Thanks for your comment. As I keep saying, contactless card is just one of the options provided by the card issuers. Whether to use it or not is entirely up to the customer. Having said, if the customer is not comfortable using contactless card, s/he can always use the swipe and PIN method for payments everywhere.

Point is, nobody is forcing you for either using contactless card or having one. You can get your card changed (there may be some charges for changing the category and cost of card) to EMV Chip card from contactless.
Ashok N
Replied to Yogesh Sapkale comment 3 years ago
Yes, nobody is forcing me. But when RBI says there should be provision to reduce the transaction limit and/or number of contactless transactions, why isn't ICICI providing it? Why are contactless cards default option?

As I said I still use my contactless card, but very careful not to take it out if I intend to go by public transport or to crowded places. There is potential loss of 2000 rs apart from cash.
Yogesh Sapkale
Replied to Ashok N comment 3 years ago
Thanks for your comment. No one can really be behind you holding their reader machine near your pocket in a public transport or at a crowded place. The system does not work that way. Also all readers have ID number and are given to merchants after due scrutiny. Contactless card readers are not easily available like the magnetic card skimmers, so nobody will come behind you in public transport or crowded place with it.
ICICI Bank does provide a lot of options for debit cards and you can chose one that comes with only EMV chip. Do check it out on ICICI Bank site https://www.icicibank.com/Personal-Banki...
Ashok N
Replied to Yogesh Sapkale comment 3 years ago
Hello Yogesh ji,
Thank you patiently replying to all comments. You misunderstood me. By public places or crowded places, I mean wherever chances of pocket getting picked is higher. Always I have been saying the same. There is potential loss when the card is PHYSICALLY lost. This is not the case with emv card.

I know card cannot read when it is inside pocket.
Abhijit Kanjilal
3 years ago
saves seconds but risk starts if misplaced or stolen. Not a recommended option.
Arpita Padiyar
3 years ago
Most pos don\'t show us the amount typed before flashing the card. Getting refund for wrongly entered amount is difficult. also does bank take liability in case of theft. A thief may flash the card at several places for less than 2k before we come to know. this card is like 2k note.
Yogesh Sapkale
Replied to Arpita Padiyar comment 3 years ago
Thanks for your comment. However, every merchant I had done transactions with has told me the bill amount upfront. Several have two displays that show the total amount for the bill. If its not there, then you can file complaint against the merchant with the service provider (bank).
Ashok N
3 years ago
I do use a contact less credit card. But I feel it is less safer since if lose the card, it can be used *without pin* till the time we realize the loss of the card and block it. I definitely don't carry the card when I am travelling by public transport.

Also though it is said that the banks have to provide for restricting its usage (number of transactions per day, or maximum amount per transaction), I haven't been able to see this provision on ICICI bank site.
Vinay Chaudhari
Replied to Ashok N comment 3 years ago
There is no way to reduce transaction limit on contact less card or to disable the feature. I have learned after fighting hard with both ICICI bank and citi bank.
Arpita Padiyar
Replied to Ashok N comment 3 years ago
i have kept the card at home not using it unless safe guards are provided. bank may treat 2k as small amount but for common man it is not.
Kalyanasundaram Srinivasan
3 years ago
Contactless card is totally unsafe ,and to make the card transactions safe card issuing company should give an option to the card holder to temporarily pause the contactless transactions of his card. The card holder at his liberty should be able to choose between contactless operations or pin based operations for his contact less card.
Yogesh Sapkale
Replied to Kalyanasundaram Srinivasan comment 3 years ago
Thanks for your comment. Kindly understand, nobody is forcing you to get and use a contactless card. It is fully your choice, whether to use it or no. Also at the billing counter, you can ask the person to swipe your card instead of tapping it on to the reader. This way you can insert your PIN to validate the transaction.
Aditya G
3 years ago
This is great! I'm all in favour of convenience, as long as user knows the security aspects & workflow in case of compromise i.e. keep that SOS number in handy!

Keying the PIN such a hassle, and I need those precious seconds of my life back, if I could, if there was a time machine. I reckon I would have lost at least 3-4 days of my life just keying the PIN after PIN over the last 20 years. Ugh!

Contactless and wallets are the way to go for the future. Next is Apple/Samsung Pay. This has to go mainstream. I'm surprised why India has not adopted Kenyan model of m-pesa model for making payments over mobile? It seems so seamless. Or maybe we did, and it failed? IDK.
Yogesh Sapkale
Replied to Aditya G comment 3 years ago
Thanks Aditya for your comment. For other payment instruments, the issue could be non-existent grievance redressal. There are several cases, where the customer is made to run from pillar to post for payment is made from their account into an e-wallets or mobile wallet. This could be one of the reasons. But as you said, with bigger players with international standards entering into Indian market, things may become better.
Uday Thakurdesai
3 years ago
Just as cash can be pickpocketed, so can the card. In which case, the thief can literally steal the entire balance. The card holder should be given an option to enforce the use of PIN should he want it. Those who are ready to bear the risk can be perfectly comfortable with the existing system. Why enforce it on those who do not want it?
Yogesh Sapkale
Replied to Uday Thakurdesai comment 3 years ago
Thanks for your comment. Kindly understand, nobody is forcing you to get and use a contactless card. At the billing counter, you can ask the cashier to swipe/insert your card instead of tapping it on to the contactless reader. This will allow you use your PIN to validate the transaction.
SURESH NAIR
3 years ago
The probability of misuse very much exists! For example if person is keeping his contactless card in his purse which is in his back pocket all the scamster has to do is to approach the person from behind and ensure that the card reader is 4cm from the card! And before you know it, you have scammed for Rs 2000! The same with cards in handbags etc!
Yogesh Sapkale
Replied to SURESH NAIR comment 3 years ago
Thanks for your comment. No one can really be behind you holding their reader machine near your pocket. The system does not work that way. Also all readers have ID number and are given to merchants after due scrutiny. Contactless card readers are not easily available like the magnetic card skimmers.
As far as misuse is concerned, it is the same case with all types of payment instruments. Point is, use contactless card only if you are comfortable for payment transactions of up to Rs2,000. If you are not comfortable, then you can use swipe/insert and PIN method for all transactions.
Arun Kumar Saha
Replied to SURESH NAIR comment 3 years ago
This is good point. I think if a contactless card is accompanied with some sort of thumb reader where it force card holder to hold his card physically at the time of tapping, would be a way for improvement
SANDESH PAWAR
3 years ago
What if we loose a card. I think is the biggest factor amongst the consumers.
Yogesh Sapkale
Replied to SANDESH PAWAR comment 3 years ago
Thanks for your comment. Your apprehension is applicable to all types of payment instruments, including chip cards or even cash in your wallet. Also as applicable to all other cards, you need to report the loss to the card issuer and block it from further misuse.
Vivek Sinha
Replied to Yogesh Sapkale comment 3 years ago
Dear Sir,
Why the bank has to force someone to use contactless credit card.
It should be totally choice of the customer. We are paying for the service.
Here As My case ICICI is forcing me to use contactless credit card or close the card that's not how bank should work.
What if I lost my card and I am unaware about it.
If any fraud happen bank takes ages to refund the amount.
Now a days bank are mostly concerned towards profit Making not the service.
Ashok N
Replied to Yogesh Sapkale comment 3 years ago
And till the time we realize the loss of the card and block, it can be misused. This is not the case with Pin based cards.
Yogesh Sapkale
Replied to Ashok N comment 3 years ago
Thanks for your comment. You may want to read...

"ATM, Debit, Credit card frauds: What you need to know and how to protect your money"
https://www.moneylife.in/article/atm-debit-credit-card-frauds-what-you-need-to-know-and-how-to-protect-your-money/48648.html
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