History of contactless payments: from the last century to the present day
Contactless payments are no longer exotic and are now part of everyday life. The possibility of making purchases with a simple touch, by paying with a smartphone or a connected watch, appeared thanks to NFC technology.
In the short term, this payment format could crowd out not only cash, but also traditional bank cards. RBC equipment provides a history of the emergence and development of this technology.
What is NFC and where is it used
Near Field Communication (NFC) – is a wireless data transmission technology. It allows the exchange of information between devices over a distance not exceeding 10 cm. Based on the exchange of radio frequencies, it does not require the Internet to use the NFC: devices connect automatically as soon as they appear within a radius of ten centimeters. When a person passes the card to commercial equipment a short distance away, the carrier signal is read and payment is made.
The first widespread use of contactless payment was recorded in South Korea in 1995, where the Seoul Bus Transportation Association issued a UPass card for passengers. It enabled contactless payments for travel. In 1997, Mobil introduced contactless payment technology allowing car owners to save time by paying for fuel without queuing at gas stations.
The first international standard for contactless payment by bank card was jointly developed by the companies Europay, Mastercard and Visa in 1996. It may take many years before the standard is introduced in the United States, but it is this step which will result in a transition of merchants to payment terminals with contactless NFC technology.
In 2004, Sony, Nokia and NXP Semiconductors created the NFC Forum, a nonprofit association whose mission is to bring technology to consumer electronics, mobile devices and computers. In the same year, contactless bank cards made their appearance in the United States and four years later, Mastercard, Visa and American Express launched not only debit cards but also contactless credit cards.
Two years later, the very first mobile device with NFC functionality was released: the Nokia 6131. Soon, contactless payments arrived in Russia. In 2013, contactless payment was introduced in the Moscow metro, at Aeroexpress turnstiles and on some bus lines in the Moscow region.
The Kazan Universiade, held in the same 2013, had a significant impact on the development of contactless payments. Especially for her, contactless multiservice cards were issued, which made it possible to go to sports facilities, travel by transport and buy tickets for competitions.
Why the smartphone has succeeded in replacing the wallet
Tech giants, perhaps more than anything else, have contributed to the proliferation of NFC payments. They logically reasoned that sometimes a person forgets his wallet at home, while the smartphone is still in his pocket. What if you could pay for your purchases just by holding your phone to the terminal? With this idea in mind, in 2011 Google launched Google Wallet, a real electronic wallet that allows the transfer of a plastic card for a telephone. In 2015 it was supplemented by the Android Pay service and in 2018 both systems were replaced by Google Pay.
In 2014, Apple responded to Google by developing the contactless payment system Apple Pay. A year later, Samsung had an analogue, while the possibilities of Samsung Pay were immediately wider: the service not only supported NFC payments, but also payment through terminals designed for magnetic stripe cards. This is how the major players in the gadget market divided the market of Europe, USA and Russia.
Finally, in 2015, EMV (Europay + Mastercard + Visa) technology was introduced – an international standard for operations with chip bank cards. The new standard aims to significantly improve the level of transaction security. The emergence of such a technology has prompted hundreds of thousands of companies around the world to switch to terminals with NFC payment, since the responsibility for a possible customer data leak now lies with the actor in the data chain. payment that has not implemented EMV.
The service is easy to set up: the card number is not stored on the smartphone or on the payment system servers. When paying, all you have to do is bring your phone or watch to the payment terminal. You do not need to enter a PIN code. The fantasy became a reality after the introduction of EMV – the “I forgot my card, I can’t pay” situation was gone, and smartphones and other portable devices really replaced the wallet.
There is also a downside: a small number of shops, whose equipment supports NFC. But it is a matter of time. In recent years, banks and chain stores have actively developed infrastructures for contactless payments.
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