Additional Information on Contactless Payment Terminals

  • Dec 5, 2010
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Contactless payment terminals allow consumers to make purchases with a simple wave of their hand, and are rapidly becoming a popular method of electronic credit card payment processing. The use of these contactless payment machines will provide benefits to retailers and consumers alike by greatly increasing the speed and convenience of transactions.

In order to make contactless payments, consumers simply wave or briefly tap their specially made payment cards on the contactless payment terminals. These terminals do not require any lengthy physical connection whatsoever between a consumer’s credit card and the terminal itself. Instead, smart chip technology is used, which easily reads the encrypted data that essentially leaps off of the card into a reader. Known as RFID – or Radio Frequency Identification – the smart chip embedded within the credit card is supported by a secure controller, internal memory and a miniature antenna that transmits all of the crucial information to a sales terminal’s reader through radio frequency.

When contactless payment terminals were first developed, many consumers and retailers called them the “future” of credit card processing. In fact, that prediction has come true already in 2008, as these “tap and pay” contactless payment systems are already benefiting retailers and consumers alike. They are bringing even greater speed and convenience to credit/debit card transactions.

The obvious advantages of a contactless payment reader over traditional magnetic swipe cards are, of course, rapid speed of the sale and overall convenience. Retail consumers can simply tap the contactless payment terminal with their RFID-embedded credit card, which removes the need for a hand transfer of a credit card and a sales receipt signature. As a result, checkout lines are significantly shorter, as transaction times become much faster.

Contactless payments are currently used at, and seem best suited for, such “fast service” retailers as convenience stores, fast-food restaurants, movie theaters, pharmacies and gas stations. A great many of these tickets are twenty-five dollars or less, which greatly reduces potential fraud loss in the event someone who is not the cardholder uses the card for such a relatively small purchase. Virtually all retail merchants with major point of sale (POS) terminals can easily upgrade their existing systems with plug-and-play contactless payment devices.

History of “Automated Cards”

In 1968, the automated chip card was invented by German aeronautical scientist Helmut Gröttrup and his colleague Jürgen Dethloff, though the official patent was finally approved in late 1982. The first mass use of these cards was for payment in French pay telephones, starting in 1983 through the major service provider Télécarte.

Roland Moreno actually patented his first concept of the memory card in early 1974. In 1977, Michel Ugon, from Honeywell Bull, invented the first microprocessor smart card. In 1978, Bull patented the SPOM – or Self Programmable One-chip Microcomputer – that defines the necessary architecture to auto-program the chip.

Three years later, the very first “CP8″ based on this patent was produced by Motorola. At that time, Bull had 1200 patents related to smart cards. In 2001, Bull sold its CP8 Division together with all its patents to Schlumberger. Subsequently, Schlumberger combined its smart card department and CP8 and created Axalto. In 2006, Axalto and Gemplus, at the time the world’s no.2 and no.1 smart card manufacturers, merged and became Gemalto.

Tap and Pay

The beginning of the “tap and pay” systems emerged in Europe nearly 15 years ago, beginning with Carte Bancaire smart cards systematically deployed in France 1992. These later developed into what has been known professionally as EMV (for Europay, MasterCard and VISA). EMV is a standard for interoperation of IC cards – or Chip cards – and IC capable POS terminals and ATMs, for authenticating credit and debit card payments.

As mentioned above, the name EMV is an acronym that comes from the initials of the first letters of Europay, MasterCard and VISA, the three companies that originally cooperated to develop the standard in this credit card chip technology. Europay International SA was absorbed into Mastercard in 2002. JCB, which previously was the Japan Credit Bureau, later joined the organization in December 2004. IC card systems based on EMV are being phased internationally, under names such as IC Credit and “Chip and PIN.” The EMV specification is also the basis of the Chip Authentication Program, whereby banking institutions provide customers hand-held card readers to perform online authenticated transactions.

The EMV standard defines all of the interaction at the physical, electrical, data and application levels between IC cards and IC card processing devices for financial transactions. Portions of the standard are heavily based on the IC Chip card interface defined in ISO 7816.

The most popular and well-known implementations of EMV standard are:

MChip – MasterCard
AEIPS – American Express
J Smart – JCB

MasterCard has a Chip Authentication Program (CAP) for secure e-commerce transactions. Its implementation is known as EMV-CAP and supports a number of operating modes.

The first version of EMV standard was published in 1999. Now the standard is defined and managed by the public corporation, EMVCo. Recognition of compliance with the EMV standard is issued by EMVCo following submission of results of testing performed by an accredited testing house.


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