Contactless payment cards launched

Cash may no longer be the simplest way of buying small items following the launch of a new ‘contactless’ payment card.

The card allows shoppers to pay for low value items costing less than £10 without entering a PIN at the point of sale. Instead, shoppers pass the card across a reader on the retailer’s terminal and the purchase is debited their bank account or added to their credit card bill.

The PayPass system has been introduced in certain areas of London by Mastercard prior to a national rollout. PayPass is already common in a number of other countries with some 16 million cards having been issued worldwide so far.

Here in the UK upwards of a 1,000 retailers have signed up to the system which, Mastercard claims, will make payments for small purchases both faster and more secure than using coins and notes.

Barclaycard also intend to introduce another version of the system called OnePulse.

Oliver Steeley, who is head of strategy and business planning at Mastercard, said that contactless payments in other countries had helped to speed up the process of making simple purchases: “Where we’ve had most success has been in places selling convenience items like takeaway food, places like pharmacies and convenience stores - pretty much everywhere where you get a peak at the middle of the day with lots of small payments.”

However, concerns have been raised about security. A survey by ATM operator Bank Machine reported that 70 per cent of respondents expressed worries over the vulnerability of the ‘contactless’ system to fraud.

But Mastercard insist that safeguards have been included to reduce the risk of any fraud. Each card will count how many payments have been made using it, and, after a certain number of purchases, the terminal will request the customer key in their PIN.

Contactless transactions would be governed by the Banking Code in the same way that chip and Pin payments are. Consumers, therefore, should be able to reclaim any fraudulent payments provided they have taken care of their card.

Initially, users will need to apply to their providers for a contactless payment card. But Apacs, the payments organisation, has predicted that there will be 5 million contactless cards in circulation by the end of 2008 and that 100,000 shops will be accepting payments using the cards.