Contactless payments have been around since the 1990s and rose in popularity during the past decade, especially as a result of the pandemic. Whilst contactless is extremely convenient and a quick method to pay, it is important to understand why there are fraud risks with contactless card payments.
The rising popularity of contactless payments
Businesses and consumers are both looking for ways to carry out business with less physical interaction. Contactless payments fit this criteria perfectly and means that people do not need to carry cash on hand, as well as use their phone for payment.
The pandemic in 2020 drove a huge increase in contactless payments with consumers “looking for a quick way to get in and out of stores without exchanging cash, touching terminals or anything else” according to Mastercard CEO Ajay Banga in a Forbes interview.
The transition to card payments was relatively slow for small to medium-sized companies, mainly due to the costs associated with accepting card payments. However, the pandemic led to a seismic change virtually overnight with a lot of companies having to start accepting cards and contactless. Whilst contactless may seem like the safer option to consumers when compared to using cash, there are some security concerns that people need to be aware of
No need for a PIN
Contactless payments are very convenient however you don’t need a PIN to use it, so losing your bank card can easily put you at risk as criminals can easily access money. In addition to this, many of the payments made by contactless do not necessarily come with receipts which can make it difficult to prove it was a fraudulent purchase. People must be protective of their cards. If they are using their cards through their mobile phone, ensuring their mobile has sufficient security features, preferably biometrics, is paramount.
Contactless cards work by using radio frequency identification (RFID) to transmit the data in order to transfer the funds. Whilst this technology is impressive, hackers have been successful in creating card skimmers that can steal this data. They then can go on to clone the card which can be used in older ATMs, shops, and even some websites if they do not have sufficient security checks in place. There are wallets designed specifically to reduce the risk of card skimmers being able to work. However, a safer way to protect from card skimmers is to use your phone. Mobile wallets are run on near-field communication rather than RFID and therefore are more secure.
Data privacy issues
Whilst mobile payments can be secure, there is always an element of risk. Every time a user downloads anything on their phone such as apps, there is a risk of malware or cyber-attacks which, if successful, could gain access to the phone user’s personal information including bank account numbers. Cyber scams are becoming more and more sophisticated.
Increased cut-off of £100
To reduce the need for cash to be exchanged during the pandemic, and to remain in line with other European countries, the UK government decided to substantially increase the contactless payment limit from £45 to £100 per transaction.
How to decrease the risk of
Both regular card payments, contactless payments, and using cash have their associated risks which consumers and businesses need to be aware of. Fortunately, there are some things people can put in place to help mitigate these risks as much as possible.
Add multifactor authentication to the transaction
Mobile payments can be made even more secure by asking for a pin code or ideally biometric identification such as face recognition or a fingerprint.
Report stolen cards immediately
it is imperative that cards that are stolen or you believe have been skimmed are frozen straight away. Whilst banks can sort this out quickly for you, there is still a chance of suspicious payments coming through which you will have to monitor by checking your bank statements.
Opt for Open Banking
Using Open Banking is a great way of securing your payments, even more so than using mobile wallet payments. Companies such as Trustist Transfer that use Open Banking means that payments are made directly from the customer’s bank account to the business’s account. This completely eliminates the need for third parties to be involved in the payment process which reduces the opportunity for security breaches and fraud.
In addition to this, Open Banking relies on strong customer authorisation, ensuring that the person who is making the payment, is the account holder. Not only does this protect the consumer, but it also helps protect businesses too as they will not have as many fraudulent transactions or additional chargebacks which can be damaging.
Contactless payment has continued to be adopted by more and more people over the years, however, contactless payment fraud is now a serious threat that businesses and individuals need to be aware of and have systems in place to reduce the impact. The largest obstacle to tackling fraud when it comes to something like contactless where the use is widespread is putting in measures to make it as secure as possible and offering customers alternative payment methods that are even more secure.