Contactless Prepaid Cards – Glimpse of the Near Future

The presence of Contactless Prepaid Cards is slowly but steadily becoming more and more visible and it certainly seems that they are here to stay.

Contactless cards differ from regular pre paid cards in the way the information is read from them by the card reader.

A regular prepaid debit card stores its data on a magnetic stripe that must be physically swiped through a card reader or on a microchip which must be inserted into a Chip & PIN device.

A contactless pre paid debit card, on the other hand, stores its data on a microchip embedded in the card’s plastic. The microchip is fitted with a radio antenna that is capable of transmitting the card’s data to a card reader without physical contact.

Using radio frequency identification (RFID) technology, a contactless pre paid credit card can transmit data to a special RFID card reader when the cardholder waves his card within a few inches of the receiver.

• Who accepts contactless prepaid cards? Up until very recently, contactless prepaid credit cards were only accepted at select convenience stores, gas stations, movie theaters, and fast food restaurants. However, the main driving force behind contactless card movement is to persuade consumers to use plastic conveniently at places which have traditionally been cash-intensive. Doing so would speed transaction times and reduce lines. While few merchants accept the contactless payments right now, the technology is expected to catch on soon and most prepaid card issuers are watching the market trends carefully with widespread rollouts are predicted in the months and years to come.

• Who issues contactless prepaid credit cards? Contactless prepaid cards are available from the major scheme providers with badges such as MasterCard PayPass, Visa Contactless and American Express ExpressPay. There are few examples of successful contactless prepaid cards currently but some successes would be the limited edition MasterCard contactless prepaid cards for the 2007 Brit Awards as well as a pilot programme to help deliver the first stadium contactless prepaid card in Europe, the Manchester City FC MasterCard® Prepaid Seasoncard with PayPass(TM), with MBNA and MasterCard to replace the standard season ticket currently issued to supporters.

• Are they safe? With contactless cards, you do not actually need to use your your Personal Identification Number (PIN) to complete a transaction and undoubtedly, this element of contactless cards makes consumers slightly nervous and unsure about using these cards. However, the cards can currently only be used to make micropayments – which means that they are restricted for use on transactions of up to £10 only. So if someone did manage to steal or misuse your card, your exposure is very limited. Furthermore, as long as you inform your bank as soon as possible that your card is missing, you will not be liable for any fraudulent transactions either. On occasion, your PIN may be requested to confirm that you are the cardholder and you are still in possession of the card.

The Contactless technologies provided by the leading scheme managers are as follows:

• MasterCard Paypass
• Visa Paywave
• American Express Expresspay

One of the biggest dilemmas faced by prepaid card issuers is the area of how to make money with contactless prepaid cards as well as how to educate consumers about their use and convince them that contactless pre paid cards are indeed safe and secure to use.

Universities are now starting to look at the benefits of these cards as they provides identity features which include details such as the student’s personal data and photograph printed on the plastic and typically access to university buildings and labs and secure areas around the canteens, etc is managed using the card’s magnetic stripe and embedded chip. In fact, access to to different rooms of the university, such as laboratories, libraries or classrooms can be automatically approved or limited. Contactless plastic can also be used to log the attendance of students at exams, classes, events and seminars in addition to providing access to internet and university web services.

With the London Travel Oyster Card and the steadfast commitment of certain banks to delivering contactless prepaid cards, we can rest assured that these contactless cards are undoubtedly going to become more visible in the near future.