A new contactless credit and debit card technology was unveiled by the banking industry this week which will allow consumers to pay for transactions of £10 or less with no more than a wave of their card.
The new system requires that card holders hold their card up to an appropriate card reading terminal so it can scan the card and process the payment. There is no need for the customer to type in a PIN or sign a cheque.
As a security precaution, the card's chip will keep a record of all such transactions and will, from time to time, prompt the user to enter a PIN.
Contactless cards are supported by both Visa and MasterCard and will enter circulation from September 2007 in London, then in early 2008 around the rest of the UK, according to payment group Apacs.
More than 20 billion payments of £10 or less are made every single year in the UK, and backers of the new card are hoping that customers will see it as a convenient alternative to carrying around petty cash.
Apacs predicts that there will be over five million active 'wave and pay' credit and debit cards by the end of next year as well as over 100,000 participating retailers.
The following organisations are planning to take part in the initial roll-out of the new cards:
- Bank of Scotland
- Barclaycard
- Citi
- Euroconex Technologies
- Halifax
- HSBC
- Lloyds TSB
- The Royal Bank of Scotland Group
Jose San Juan, Visa UK managing director, said: "I am pleased that the industry has united on standards for cards and terminals that will provide a highly convenient and quick way to pay for low value items."
"By the autumn the first UK cardholders will be buying a coffee or a sandwich in a split second, and retailers will enjoy quicker transactions, the security of the payment guarantee and an end to the high costs associated with handling cash."
John Bushby, UK general manager for MasterCard Europe, was in agreement. He explained that trials had shown that "consumers love the convenience, simplicity and security of being able to 'tap and go' when paying for every day things such as newspapers, sandwiches and drinks."
"We are confident that consumers in the United Kingdom will be quick to adopt contactless payments as they are faster and more convenient than cash."
However, fears have been raised over the security of the new cards, and some critics believe that the new system will lead to a fresh rise in card fraud.
David Kuo, head of personal finance for Fool.co.uk, has also warned that the use 'wave and pay' technology is likely to result in customers spending more than they do with cash.
“The rollout of contactless credit cards will give consumers a completely new way to pay for low-value items with the wave of a hand. However, just because something is of low-value is not the same as being of no value," he explained.
"Contactless payment may be billed as being more convenient than cash. But it is also likely to lead to consumers buying things that they don't need with money that they cannot afford."
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