Several years ago, most people in the UK were issued with new bank cards featuring the now familiar chip-and-pin system (formally specified by the EMV group). The goal was to provide greater protection to transactions by removing easily forged signatures and greatly increasing the state of card cryptography, at least compared to the old magnetic stripes. While the system has its flaws, it has been a success and is now an every day part of life here in Great Britain, as well as most of the Western world.
One problem it doesn’t solve is timeliness for small transactions. If you’re buying a cup of coffee, a sandwich or a similarly low-value set of items, using a card still takes a great deal longer than a cash transaction. If you have a queue of people all paying by card, the time taken really adds up, both for shops and consumers.
There is a solution that has been trialled in various ways over the last few years, called EMV contactless. By embedding a small radio transmitter (tiny, tiny range) into modern credit cards, we can now make use of chip-and-pin free technology. Rather than inserting your card, typing your pin, and awaiting authorisation, you swipe your card over a reader (less than a second) and that’s it. It gets enough of your details to charge you the right amount (which it tends to do in the background) and you get on with your day. You basically have a system that’s much faster than cash.
You might be thinking that this sounds familiar if you live in or have visited London in the last 6 years or so: this is exactly how Oyster cards work on London Transport. You swipe, you walk through, and that’s it. It may also be familiar to American readers who are part of the Chase bank. It’s been deployed by them under the name Chase Blink. (I should say I was once employed by another part of Chase’s parent company, but obviously had nothing to do with any of this – I just read about it there first. My opinion is not their opinion, yadda yadda).
Now, obviously, an instant debit card that finishes transactions after you leave is open to fraud: you could charge up a number of small transactions that total a huge amount. They’ve thought of that. There are both per-transaction and daily limits before you have to revert to chip-and-pin. It’ll vary from bank to bank, but I’ve seen sensible limits of £10 per transaction and £50 a day. That should cover the use-cases here i.e. replacing cash and low-value card transactions.
A far more interesting problem is proliferation. I have one of these cards (it got sent out within the last week) but, as far as I know, there are absolutely no places in Glasgow that I can actually use it. I imagine big name, high-volume chains will get it quickly (coffee chains, fast food, etc), but I can’t imagine a quick change for most other vendors. Given the cost in upgrading aging equipment to be chip-and-pin compatible, a real concern for this system is how smaller companies who would really benefit from contactless transactions are actually going to be able to afford it. Sure, the convenience and time-saving probably make it worthwhile in the long term but I imagine the equipment involved is prohibitively costly for many operations.
If this had been incorporated into cards at the same time as chip-and-pin, then I’m sure it would be huge and have a bright future. As it stands, I doubt its going anywhere fast. I would like to be wrong on this one.