‘Contactless cards’ are chip based credit cards/debit cards/smart cards built on near-field communication technology (NFC). The special feature of a contactless card is that you can complete a payment transaction just by waving the card near merchant terminals instead of swiping the same. These cards are complied with EMV payment standard and they have payment provisions without PIN authentication. Therefore payments process through contactless cards is much faster compared to other regular cards. The contactless cards can be easily identified as ‘contactless’ logo is embossed on the face of the Card, as well you find the POS terminal/merchant locations where the payments of such cards are accepted.
The ‘contactless card payments system’ may no doubt, nurture innovative payment products/processes as also convenience dynamics in certain types of card payments. On the other hand, the process of contactless card payments accessed without PIN authentication is exposed to risk of fraudulent transactions. In India, therefore country’s central bank ‘Reserve Bank of India’ made Additional Factor of Authentication (AFA) like PIN, online alerts mandatory for all types of card payments. Yet, after examination of trade-off between security and convenience in certain type of card transactions, the bank has permitted relaxation for AFA requirement for small value payments. The relaxation in AFA requirement is applicable only for maximum value of Rs.2000/- per transaction across all categories of merchants in the country where such contactless payments will be accepted. However, the relaxations shall not apply to ATM transactions irrespective of transaction value and card not present transactions (CNP).
The Reserve Bank of India clarified that a customer who seeks credit card/debit card or smart card etc. cannot be compelled to do contactless payments. The Card holders should be made to known that they are also free to use the same card as a regular chip card (with PIN authentication) at any location irrespective of transaction value. If the customer chooses to make payment only through ‘contact payment’ that has to be facilitated by both issuing bank acquiring bank. Further, beyond the limit of Rs.2000/- the card has to be processed only as a ‘contact payment’ and authentication with PIN is mandatory. RBI communiqué dated May 14, 2015, addressed to all the banks including RRBs, Co-op Banks and Authorized card payment Networks, directed that the responsibility of authorizing the contactless payment limit will lie with the card issuing bank and advised that they may facilitate their customer to set lower per-transaction limit. Banks can also fix a maximum contactless payment limit to a customer in a day, week and month. The banks have been further instructed that they have to clearly explain their customer about the technology, its use and risks while issuing contactless cards. All contactless card holders need to be educated with regard to maximum liability devolving on them, if any, at the time of issuing such cards and shall be informed of customer’s responsibility to report the bank in case of loss of card.