InvestorQ : How do contactless cards work?
priya Shah made post

How do contactless cards work?

Anusha Savla answered.
3 years ago

Contactless cards are plastic cards (debit/credit/forex cards) that can be used at any point of sale without swiping it.

Investopedia explains contactless payment as a secure method for consumers to purchase products or services via debit, credit or smartcards (also known as chip cards), by using radio-frequency identification (RFID) technology or near-field communication (NFC).

To make a contactless payment via a contactless card, a person simply needs to tap their card near a point-of-sale terminal – leading to the nickname “tap-and-go”.

It further explains: Since contactless payments do not require a signature or a PIN, transactions sizes on cards are limited. The allowable amount for a contactless transaction varies by country and by bank. Examples of non-credit or debit card contactless payments include transit cards, Apple Pay, Android Pay and Google Wallet.

The way contactless cards work is simple:

1. The merchant’s terminal reads the chip on the contactless card

2. The terminal transmits the data to a card-processing network (like Visa or Mastercard). This network then checks if the data that’s received is in the correct format or not.

3. In this step, there is verification of data and analysis of fraud. Only once the system deems everything to be accurate does it allow the card issued to receive data

4. The card issuer then confirms the card isn’t stolen and sufficient funds are available.

5. Data is then passed on to the issuer, through the card network, to the merchant and then the payment is approved.