The contactless card
Contactless payment cards boast convenience and ease-of-use at purchase, but are they secure? A host of recent reports have called into question their security.
This type of card uses near-field communication, or NFC, to conduct payments. Card information is stored in a chip on the card or device and that data is transmitted via radio frequency to a payment terminal equipped to accept this type of tap-and-go payment. Some credit cards and gas stations offer this technology.
The technology is similar to RFID, or radio frequency identification, found in electronic toll collection tags such as E-ZPass. The key difference is the RFID technology is meant to be read at great distances, while NFC technology is meant to be read at a very close distance, no more than 4 inches.
The media reports focused on the possibility that someone could lift the information from a card while it's still in a wallet by simply waving an NFC reader close to it. So far, the fears are unfounded because they have occurred only in demonstrations. There has been no reported fraud committed like this.
"It's certainly not in banks' interests to employ a technology that puts their consumers in danger," says Michael Misasi, senior analyst at Mercator Advisory Group. "It's my understanding that NFC cards only operate within a couple of centimeters."
NFC cards also allow consumers to hold onto their cards throughout the entire transaction, eliminating the ability of fraudsters to skim their cards.