Webinar explores the rise of contactless payments

Contactless payment cards are the next generation of bank cards, replacing the swipe card, said Braden More, executive vice president at Wells Fargo. More joined Rachel Siegel, senior associate of consumer finance with Pew Charitable Trusts, and Christina Tetreault, who at the time was manager of financial policy at Consumer Reports, at Consumer Acton’s “Adoption of Contactless Payments During the COVID-19 Pandemic” webinar on April 20.

In his overview of contactless payments and how they work, More pointed out that, in addition to the advantage of being “contactless,” the chip card technology is much safer than the old “strip” technology. He noted that while hacking a credit or debit card chip or a smartphone to conduct illegal transactions is not impossible, it is impractical: Criminals would have to obtain a machine that costs thousands of dollars to hack the chip, and the average criminal is not able to make that type of investment.

While More focused on the technology side of contactless payments, Siegel concentrated on consumer behavior. Although conducted prior to the COVID-19 outbreak, Pew’s 2018 research on the adoption of mobile payments revealed that half of consumers surveyed made mobile payments that year, with 8 in 10 reportedly linking their bank account or credit card to a mobile app. The research also showed there was some resistance to the adoption of mobile payments: 30% of consumers reported that they avoided using mobile payments to prevent loss of funds and because they viewed mobile payments as riskier than other options.

Siegel noted that, despite earlier trepidations, consumers have leveraged mobile payments more than ever since the outbreak of COVID-19, mainly to avoid contact with others, while still accomplishing transfers and purchases. Further, many of those who started using mobile payments during the pandemic—especially peer-to-peer payments—plan to continue to do so. Siegel emphasized that mobile payments will continue to be a primary vehicle for new payment technologies, as developments in faster payments, regulatory “sandboxes” (FinTech market testing of new technology that is sanctioned by regulators to spur innovation) and other policies are deployed. However, she warned that without thoughtful oversight, these strategies could also undermine consumer protections.

Tetreault’s focus was on educating the audience about pertinent consumer protections. She explained that the two most critical protections that consumers should be aware of are the limits on the dollar amount of fraudulent transactions a cardholder can be held responsible for and the right to dispute unauthorized transactions.

She emphasized that when it comes to contactless payment protections, the type and level of protection depends on the payment type. For example, if you’re using the Walmart app and it is linked to a credit card, all of the protections afforded a credit card user would apply to any transaction made on Walmart’s app. On the other hand, if you’re using the Starbucks app and you’ve linked it to a bank account, bank account-related rules, like the Electronic Fund Transfer Act, would apply.

Tetreault wrapped up with tips for using contactless payments. She noted that using or linking a credit card (instead of a debit card) offers the greatest protections—but only if you’re not carrying a balance on the card, which would increase your balance and cost more in interest. Consumers with a mobile phone were advised to use a mobile wallet, linked to a credit card if possible, but only if they secure their wallet with two-factor authentication (requiring a one-time passcode, fingerprint or other type of key).

View the “Adoption of Contactless Payments During the Pandemic” webinar on Consumer Action’s YouTube channel.

Consumer Action will be hosting another webinar, “Share Financial Data with Care,” on Tuesday, June 29. If you are interested in attending, register here.