A new global payment specification from Visa removes the need to physically insert a smart card into a reader.
The specification, designed to work side-by-side with chip and magnetic stripe technologies, will support a faster and more convenient way to pay and be paid, particularly in environments where access to traditional, card-based payment methods has been limited.
Based on an international standard, ISO 14443, the specification uses a chip embedded in a plastic card or an electronic device, such as a mobile phone. The card, mobile phone or other device is then held in front of a terminal and a wireless interface transmits the payment information.
The initiative is part of a drive by Visa to harness new technologies that enable buyers and sellers to carry out transactions conveniently and securely.
"This new technology removes the need to insert or swipe a payment card, making it easier to pay in places where speed and convenience are important," according to Sue Gordon-Lathrop, vice president, emerging consumer environments, at Visa International. "This latest effort and other compelling initiatives tied to chip and magnetic stripe technologies move us closer to our goal of displacing cash."
Contactless technology is one of several efforts by Visa to extend the value of electronic payments. Other innovations include the use of infrared technology to transmit payment data, global specifications for multi-application smart cards (GlobalPlatform), and online payment authentication technology (Verified by Visa).
The various initiatives in select markets are intended to preserve the integrity of the payment card network, noted Gordon-Lathrop. "We're working with a range of technologies that provide us with a way to improve and enhance the way we make payments. They add value and utility to the traditional plastic card and, at the same time, enable us to extend secure payment to other kinds of devices such as mobile phones, PDAs and pagers."
The first use of the new contactless technology is expected to be in South Korea, where telecommunications company SK Telecom plans to develop products based on the specification. SK Telecom and Visa are working together to test the viability of infrared payment for mobile phone users.
Contactless smart cards are increasingly being used in buses and metro systems worldwide. (See Cover Story, page 30.) Future applications could include parking, vending machines, service stations, as well as locations where payment cards have been less widely accepted, such as fast food restaurants.
Contactless technology enables a terminal to capture payment card information as the card or phone is passed within a short distance, typically up to 10 centimeters. The transaction then follows the normal payment process with the cardholder providing a signature or PIN number as a means of verification if necessary.
This is the first time, however, that contactless technology has been applied to general-purpose payment cards. The most common use for the technology has been in transit systems, particularly in Europe and Asia. The new specification will allow for its use for everyday payments. Vendors working with Visa include Cybernet, Ingenico, Philips Semiconductors, SchlumbergerSema, and Smart Card Solutions.