Future Belongs To Contactless Debit And Credit Cards


The New Year has come with good news for all the debit and credit card holders, who don’t have to swipe their cards on merchant outlets any more. Previously, cardholders had to give their cards to the cashiers at retail stores at the time of payment, which had the potential risk of card cloning. However, with the coming of the contactless cards, this risk has been eliminated.

Contactless debit and credit cards have been launched by the ICICI Bank first, but all other banks are expected to soon follow suit. These cards use Near Field Communication or NFC to make payments at retail outlets. With these cards, customers need not swipe their cards at POS (Point of Sale) like before. They can just tap the NFC-based card reader, and the payment will be made instantly. However, they will need to enter their PIN (Personal Identification Number) as per the guidelines of Reserve Bank of India (RBI).

We have been witnessing cases of card cloning and fraudulent payments for a long time now, and contactless cards seem to be the perfect solution for this problem. The State Bank of India (SBI) has already appealed to the RBI to stop the swiping system in order to get rid of fraudulent activities.

If we are to consider the existing card swiping system in India, we find that not more than 12 lakh POS machines have been installed at retail outlets across the country. This may be because each POS machine costs around rupees 15,000.

India is a growing economy, and there is nothing wrong in trying a new payment method that can potentially improve the market situation. ICICI Bank has installed some 1200 NFC-based card readers to initiate the contactless card scheme. If other major banks like the HDFC, AXIS Bank, and SBI, which collectively hold almost 60 percent of the POS network, take a similar initiative, we would be able to see a lot of positive changes in the market. The best thing about the NFC-based card readers is that they cost rupees 2500 per machine, not even 20 percent of the cost of the POS machines which are currently used.

This should be seen as a new opportunity in the country. Small shopkeepers, barbers, and retailers cannot afford to install a machine that costs around rupees 15,000, which is precisely why one is unable to use plastic money to avail their services. A lot of them may, however, be able to afford the installation of a machine that costs as low as rupees 2500. If such businessmen actually start using NFC-based machines, then our cash economy can perform much better. At the same time, banks can also track payments, which will eventually help reduce black money and unregulated payments.

The new NFC-based payment initiative of ICICI Bank has immense potential and seems to be the future of the Indian Payment System.

Bhupendra Sharma

Image Source: [http://eandt.theiet.org/magazine/2013/07/images/640_paypass-wallet.jpg]