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Business News/ Money / Calculators/  Contact-less cards are on their way
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Contact-less cards are on their way

Many banks are gearing up to launch such cards. But RBI is still to give a nod

Hemant Mishra/MintPremium
Hemant Mishra/Mint

Banks are planning to launch contact-less credit and debit cards in the market soon. The cards, which use near field communication (NFC) mechanism, will allow you to transact without having to insert or swipe. “ICICI Bank will introduce contact-less debit and credit cards within a month. The bank will introduce these cards in Gurgaon, Bangalore, Hyderabad and Mumbai to begin with," said Rajiv Sabharwal, executive director, ICICI Bank Ltd.

Kotak Mahindra Bank Ltd, too, is on the same path. “We are watching this space. We want to observe how it goes. We would finalize our plan probably in the first quarter of next year," said Sumit Bali, executive vice-president, Kotak Mahindra Bank.

Other banks have similar plans. Vijay Jasuja, chief executive officer, SBI Cards and Payment Services Pvt. Ltd, said, “SBI Cards will soon offer contact-less cards to its customers contingent to approval from RBI (Reserve Bank of India). With the NFC technology, cardholders only need to wave their cards in front of the readers at merchant outlets, from up to four inches distance."

Axis Bank Ltd, too, will offer this card. “We are exploring contact-less payment technologies. We are launching an NFC-based card in Bangalore, in partnership with Bangalore Metropolitan Transport Corporation (BMTC), which will allow customers to ‘tap and go’ to pay for transit within the city. It would offer the same payment facility for other small-ticket purchases," said Jairam Sridharan, president, retail lending and payments, Axis Bank.

How does it work?

You don’t have to swipe the card at the point of sale terminal. To an extent, it’s similar to the cards already in use at Delhi Metro and Airport Express lines. You can simply tap it on the terminal and pay for your purchases. In countries where such cards are already in use, cardholders hold the card near the terminal screen. Within seconds there is a beep and a sales slip is issued when the transaction is complete. These cards can also be used in the traditional way as well—swiped or dipped. With these cards, cardholder signature is not required. You can only use these at a merchant outlet that has a contact-less terminal.

“There is huge potential for these cards. It works in three kinds of merchant outlets—fast food restaurants, supermarkets and at movies or petrol pumps or transit. These will be the primary drivers," said Uttam Nayak, head, emerging products digital, Visa.

What to expect?

Before these cards are launched in India, the required infrastructure will have to be set up. “Retail outlets will have to install contact-less terminals. These terminals will have specific design with a built-in reader," said Nitish Asthana, general manager, ICICI Merchant Services, First Data, provider of card payment processing services.

Initially, you may be able to use these cards only for transit and at quick-service restaurants. “It will start with transit and then you can expect the usage at retail outlets. In Australia and Singapore, you can use contact-less cards at multiple outlets," said Raj Dhamodharan, group head, emerging payments (Asia Pacific), MasterCard, adding that many banks in India have shown interest in such cards.

These cards will come with a limit on transaction amount. Similar products in other countries are being used mostly for small transactions. “In all the markets where we have contact-less cards, there are transaction limits on usage. For instance, in Australia, the limit is $100. For transactions of more than this, customers have to sign to prove their identity. It should be similar in India too," said Dhamodharan.

According to Nayak, a transaction limit of around 2,000-2,500 is a good starting point at, say, fast food restaurants.

The Reserve Bank of India is still looking into it. “Some regulatory clarity needs to emerge on enabling transactions without a PIN (personal identification number)," said Sridharan. “At present, all debit card transactions at merchant points need to be authorized by the customer through a PIN entry. This requirement effectively stops the emergence of NFC as a viable technology. However, if RBI allows small ticket transactions (below a threshold amount) at merchant points of sale without a PIN, it will be a key enabler for NFC and contact-less (cards) to take off," he added.

While such cards will indeed offer convenience (no PIN or signature means faster transaction), approval from the central bank, usage charges and merchant compatibility remain issues that have to resolved first.

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Published: 26 Nov 2014, 06:41 PM IST
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