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How do contactless payments work?

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Quick answer

Contactless payments use radio waves to send encrypted data from a chip card or phone to a reader a few centimetres away. The reader forwards the data to a bank network, which approves the transaction in seconds. Small payments often need no PIN, while larger ones may require a PIN or signature for security.

Contactless payments work by using radio waves to send encrypted card or phone data to a reader a few centimetres away. The reader forwards the data to a bank network, which approves the transaction in seconds without a physical swipe or PIN for small amounts.

Step by step

  1. You hold your contactless card or phone within a few centimetres of the reader.
  2. The reader emits a low-power radio field that powers the card's chip; a phone runs its payment chip on battery power.
  3. The chip sends a one-time encrypted code containing your account details to the reader.
  4. The reader passes the code to a payment network, which asks your bank to approve the amount.
  5. Your bank approves or declines, and the reader shows the result, usually in under a second.

Key things to understand

  1. A contactless card or phone contains a small chip and an antenna that can communicate by radio.
  2. The reader emits a low-power radio field that powers a card's chip when it is held close; a phone uses its own battery.
  3. The chip sends a one-time encrypted code representing your account details to the reader.
  4. The reader passes the code to a payment network, which checks with your bank for approval.
  5. For small purchases, the bank approves without a PIN; larger ones may require a PIN or signature.

Labelled diagram

  1. Card or phone

    Contains a chip and antenna that can send and receive radio signals.

  2. Reader

    Emits a low-power radio field and picks up the chip's signal.

  3. Payment network

    Routes the encrypted data to the correct bank for approval.

  4. Bank

    Checks the account and approves or declines the transaction.

  5. Confirmation

    Reader shows approval, and the payment is complete in seconds.

How a contactless payment works

Real-world examples

  • In London, you can tap a contactless card or phone on a yellow reader to pay for a bus or Tube journey.
  • At a supermarket checkout in Mumbai, a customer taps a debit card on the terminal for a small grocery purchase.
  • In New York City, the OMNY system lets riders tap a contactless card or phone to enter the subway.
  • At a coffee shop in Sydney, a barista holds a portable reader while the customer taps a phone to pay.

Common mistake

✗ Myth: Contactless payments are less secure than chip-and-PIN because they don't require a PIN.

✓ Fact: Contactless payments use one-time encrypted codes that are useless to a thief if intercepted. The short range and the need for a PIN above a limit add further protection, so cloning protection matches chip-and-PIN; the main extra risk, a lost card used without a PIN, is capped by spending limits.

People also ask

What is the range of contactless payment?
Contactless payments typically work only when the card or phone is within about 4 to 10 centimetres (1.5 to 4 inches) of the reader. The reader's radio field is deliberately kept weak so that only a card held very close can be read. This short range also makes it hard for anyone to intercept the signal from a distance.
Why do contactless payments sometimes fail?
Contactless payments can fail if the card or phone is not held close enough to the reader, if multiple cards are presented at once, or if the reader's radio field is disrupted by metal or other electronic devices. Sometimes the bank declines the transaction for security reasons, such as an unusual spending pattern. Trying again usually works.
Do contactless payments work without internet?
Yes, the reader itself needs a connection to the payment network, but your card or phone does not need internet. The card communicates with the reader using radio waves, and the reader sends the data to the bank over its own connection. So you can pay even if your phone has no signal, as long as the reader is online.
Is contactless payment safe from thieves?
Yes, because each transaction uses a unique encrypted code that cannot be reused. The short range of the radio field, typically under 10 cm (4 inches), makes it hard to intercept from a distance. If a card is lost, the bank can block it, and you are usually not liable for unauthorised payments.
Why is there a limit on contactless payments?
The limit reduces risk if a card is lost or stolen. Without a PIN, anyone holding the card could pay up to the limit. Banks set the limit low enough to be convenient but high enough to cover everyday purchases like coffee or groceries. Above the limit, a PIN or signature is required.
Can I use contactless payments with my phone?
Yes, if your phone has a secure chip and you have added a card to a mobile wallet. The phone uses the same radio technology but adds a fingerprint, face scan, or passcode for extra security. The phone sends a token instead of your real card number, so the merchant never sees your actual details.
What happens if two contactless cards are near the reader?
The reader can only communicate with one card at a time because it needs a clear signal. If two cards are held together, the reader may fail to read either or pick one at random. To avoid confusion, present only one card or device at a time.

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