New technologies always bring new questions. It’s expected. The challenge is to answer the new questions and determine which questions really matter to consumers.

Well, a story that raises questions about the security of contactless payments – and the RF technology that enables them – has been circulating on the Internet and in investigative news reports on TV,  causing unfounded concerns for consumers.

Here’s the short story.  Recently, a speaker at a hacker conference called a volunteer on-stage. Within minutes, the speaker used special electronic equipment to wirelessly “steal” the volunteer’s credit card and make a transaction.

It makes for great theatre and presentation but there’s a problem. The demonstration isn’t based on how transactions are protected in the real world.

Contactless payment methods, such as MasterCard PayPass, have layers of security built into them. You know how your credit card has a CVV, or Card Verification Value, on the back or front of it that is used to verify transactions on the Internet? Well, contactless payment chips create a new CVV every time they’re used.

Over the last six years, the Smart Card Alliance has worked with all the major players on contactless payments. We estimate that 75 million cards with contactless technology have been issued to consumers.

Guess how many cases of credit card fraud of this type have been reported? Not one. That’s right. We haven’t found a single case of cards being wirelessly compromised, and there’s good reason for that. We even checked and confirmed this with the U.S. Secret Service (the leading government agency when it comes to counterfeiting) and the Identity Theft Resource Center.

Even if someone wirelessly stole your contactless credit card number, they wouldn’t have enough information to make a counterfeit card and use it at a merchant point of sale – Now THAT’S protection!

And if somehow the merchant doesn’t follow the rules and check for the additional security information – allowing the fraudulent transaction to go through – you’re backed by your issuer’s zero liability policy which protects you from any charges made on a stolen credit card.

While the stage show is entertaining, the truth is that contactless payment technology is as safe, if not safer, than traditional credit cards using magnetic stripes.

…and both, contactless technology and magnetic stripes, are a lot safer than carrying a wallet full of cash.

*Randy Vanderhoof is a guest blogger and the Smart Card Alliance Executive Director.

Categories: Making Life Easier, News and Views

Tags: Alliances, Cashless Society, Contactless payment, PayPass