The Advantages and Disadvantages Of Contactless Payment Systems

Advantages:

1.   Better security:  It’s far more secure than mag stripe data.  Messages are single use, so reading them is useless.  Skimming is virtually impossible. Without a PIN, a stolen physical card can be used, so it’s less secure than chip-and-pin, but mostly because of the pin.

2.   Variety of form factors: Mag stripe is very specifically designed to be on a card, and it’s yet to be seen whether EMV will make its way to other form factors (I’m guessing no).  Contactless is found on cards, key fobs, smartphones, vehicles, or virtually anything that can be transported with a person.

3.   Convenience.  Tapping to pay is faster and more convenient than most other forms of payment.  A contactless card, for instance, can be used without removing it from your wallet.  Contactless in transit venues allows lines of people to flow quickly through turnstyles.  The multiple form factors also offers more convenience.  My car can automatically pay-at-the-pump with Speedpass.  I can buy my groceries with my phone.  To my experience, only proximity (iBeacon, Bluetooth Low Energy) and contextual payment systems (like Pay With Square) can meet or exceed the convenience.

4.   More features.  When specifically tied to a smart phone, such as Google Wallet, many features are now available that are impossible for a mag-stripe card or even EMV.  Payment history, virtual card provisioning (safer), remote deactivation, and user-configured pin-protection are just a few of the features.  The sky is the limit here.

5.   Opportunities for innovation.  Primarily due to their viability on smart phones, contactless payments provide a platform for innovation.  In the past 60 years since its invention, what innovation have we seen on the mag-stripe?  Very little (queue the hate mail from the one person with a patent on magstripe oxidation and embossing processes). We’ve seen quite a bit with contactless in a much shorter time, and continue to see it today.  I expect this trend to continue.

Disadvantages:

1.   Acceptance.  Contactless cards are accepted at far fewer locations than mag-stripe.  Consumers cannot leave home with only their NFC-capable phone, because they will inevitably need a mag stripe to pay.

2.   Less implicit.  If you have multiple cards in your wallet and you pay without removing them, the winner is random luck.  Sometimes, this can cause real issues (such as errors at transit settings).  Personally, I think this is just a “feature reality” but I have heard some complaints about it.

3.   Less secure than chip-and-pin.  When you introduce a pin to EMV, using a stolen card in brick-and-mortar is almost impossible.  Contactless could also use a pin (and often does for high-value transactions), but then you lose much of the convenience of contactless payments.

Source : Dan Martin, Community Manager, MasterCard Developer Zone