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We have seen the contactless functionality pop up in many stores over the last few years. You have probably seen the popular commercial where people are walking in an efficient circle, taping their card onto a contactless device, until one guy pulls out cash and the whole line comes to a screeching halt. Contactless payment systems are credit cards that have a device using a Radio Frequency Identifier (RFID) to make a secure payment. The consumer is able to wave their card over a reader at the consumer location to make their purchase. There is typically no signature required for purchases under $25.00.

Although many large retail chains such as Regal Cinemas and McDonalds have the technology available, the process has been put under a great deal of scrutiny because it is said to be more susceptible to identity theft and other types of fraudulent activity. The devices are easily hacked using a wireless frequency. Regardless of the security risks, all the major credit card companies were ready to get their piece of the action. In July of 2005, AMEX launched ExpressPay, which was quickly ditched because of a lack of response by consumers. The Discover Network released its Zip technology, Visa Inc released payWave, and MasterCard has PayPass.

MasterCard Mobile recently released its Secure Set-up for MasterCard PayPass on mobile phones. They call this the Over-the-Air Provisioning Service, and it is the first program to enable issuers to perform over-the-air personalization of their cardholders’ mobile devices. Mobile MasterCard PayPass enables mobile devices to perform payment transactions at merchant locations with PayPass enabled point-of-sales terminals. In order for account holders to use their mobile phones to make purchases, their mobile phone must be equipped with Near Field Communications (NFC) and a mobile data subscription. First, the PayPass application is downloaded onto the consumer’s mobile phone. The application is available through their issuing banks website. Then, the PayPass application is personalized with the consumer’s individual account details.

With the wide range of savvy hackers out there, it may still be hard for consumers to feel safe about the contactless payment technology – whether it be on a mobile phone or on a credit card. As for merchants, my advice is hold of off on buying your contactless equipment just yet.