Contactless Payments Are Heading Toward a Cashless Future

Digital wallets and wearables, even a humanoid robot, are changing the way we pay

8 August 2016

Contactless digital payment systems are all the rage. About a billion such transactions were made in Europe alone in 2015, an increase of 150 percent over the year before, according to MasterCard.

These systems are called contactless because money or personal checks are never exchanged, and no credit card needs to be swiped or inserted in a card reader. But don’t expect them to become the preferred way to pay for things until at least 2030. That’s when these systems will have convinced a critical mass of would-be users that they are safe, according to an IEEE survey on the future of cybersecurity. Nearly 2,000 technology enthusiasts were asked earlier this year to weigh in on a variety of topics, including these payment systems.

Devices such as smartphones equipped with near field communication (NFC) chips have ushered in the ability to pay for purchases through so-called digital wallets. NFCs use a radio frequency of 13.56 megahertz—in the industrial, scientific, and medical band—and transfer data at up to 424 kilobits per second. Shoppers preload their credit card information via an app, hold their device near the contactless reader, and this information is sent on an RF signal and verified by the reader sitting next to the cash register. It takes about 4 seconds to exchange information between systems in close proximity—which usually means less than 5 centimeters apart. In addition to smartphones, such chips have been installed in credit cards and some wearables.

The array of available smartphone wallet apps is already dizzying. Even a humanoid robot will soon be accepting payments. Here are a few of the systems vying for your contactless cash.


    Apple Pay, Apple’s mobile payment system, with the Apple Wallet digital wallet app, is the dominant system. Launched in 2014, it is now used in eight countries. More than 2 million locations in the United States use it—in, for example, retail stores, sports stadiums, laundromats, and parking lot payment terminals. In July, Apple Pay was introduced in France and Hong Kong.

    Apple Pay works on all the company’s mobile devices once credit or debit cards have been “registered.” A user takes a picture of each credit card and loads them into the Apple Wallet app. Instead of sending the credit card number to the merchant, Apple Pay uses a system whereby the 16 digits of the credit card are replaced with an algorithm-generated number, called a token. To pay at checkout, the smart device is held near the contactless terminal while the user presses a finger against the device’s fingerprint reader or enters a passcode. A receipt is recorded by Apple Wallet.

    Google’s Android Pay app for Android devices, which also relies on tokens, operates similarly. Android’s system is accepted at a million stores in the United States and was recently introduced in Australia, Singapore, and the United Kingdom.


    For those who don’t feel comfortable using their mobile devices to pay for stuff, American Express, MasterCard, and Visa offer contactless credit cards. No swiping, signing, inserting, or entering PINs as with debit cards. All use NFC chips. Users make payments by just waving their cards within about 2 centimeters of the reader. Credit card companies also offer digital wallet apps for smartphones that store cardholders’ credit card information.


    Several smart watches like the Apple Watch and Samsung’s Gear S2 also have NFC chips. Just click on a side button and hold the display up to the reader. A beep confirms the payment information was sent. Both watches are considered relay devices. This means that to make a payment, a person with the watch (or a wearable) must also have a smartphone nearby to “relay” the credit card information stored in a wallet app.

    The NFC chip is also in fitness trackers so people can buy things as well as track their steps. Jawbone’s UP4 tracker, for example, is teamed with American Express. Here, too, the tracker must be paired with a smartphone so payment information can be loaded into the tracker. When a user is ready to pay, he or she presses a payment button on the fitness band to signal the contactless reader.

    Starbucks regulars in the United States can use the Microsoft Band 2 fitness tracker/smartwatch hybrid to pay for their macchiatos. But first they must add the Starbucks tile to the Microsoft Health app. To pay, a customer turns on the band’s screen and selects the tile. A bar code then pops up that the cashier scans with a bar code reader.


    By the end of the year, the first commercial application for the humanoid robot Pepper [above] is scheduled to be unveiled in Asia. The robots will be waiters at Pizza Hut restaurants. And they will accept MasterCard’s contactless payment system. Developed by Japanese telecommunications giant SoftBank, Pepper walks, talks, gesticulates, and moves on wheels. The robot’s built-in “emotion engine” allows it to talk and interact with people in what is hoped is an engaging way.

    Pepper’s main functions are explaining the menu, calling out the specials, and taking orders and payments. The robot’s payment system will be powered by MasterPass, MasterCard’s digital payment system. Pepper will initiate, approve, and complete a transaction by connecting to MasterPass via a Wi-Fi connection. Diners with a MasterCard—in not exactly a contactless fashion—either tap the MasterPass icon or scan a QR code on the tablet the robot holds with their smartphones. QR, or quick response, codes are the most widely used medium for mobile bar coding.

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