Contactless Cards vs Mobile Wallets: A Battle?

Salomon Kisters

Jun 13, 2023

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As technology keeps advancing, so does the way we make payments. We used to carry physical cash, then we moved to carry plastic cards. Now, we have contactless cards and mobile wallets, which allow us to make payments without even taking our cards out of our wallets.

But which one is better? Is there a battle between the two? In this blog post, we’ll be exploring the pros and cons of contactless cards and mobile wallets, as well as the differences between the two.

So, let’s dive in and see which one comes out on top!

The Rise of Contactless Payments

Contactless payments have become increasingly popular in recent year, and for good reason. They provide a fast, convenient and secure way to make payments without having to insert a card or type in a PIN. In fact, the use of contactless payments has surged during the COVID-19 pandemic, with many consumers opting for the contactless option to avoid touching physical surfaces.

Contactless payments were first introduced in the late 1990s, but it wasn’t until the last decade that they really started to take off. In 2007, Barclaycard launched the first contactless payment system in the UK, followed by other banks and retailers around the world. Today, contactless payments are widely accepted and can be made using a contactless-enabled debit or credit card, a mobile wallet, or a wearable device.

One of the biggest benefits of contactless payments is speed. Transactions can be completed in a matter of seconds, making it a convenient option for those on the go. Another advantage is security. Contactless payments use encryption technology to ensure that the transaction is secure, and the risk of fraud is lower than with other payment methods.

How Contactless Cards Work

Contactless cards work by using near-field communication (NFC) technology, which allows for quick and secure data transfer between two devices that are close to each other. In the case of contactless payments, the two devices are the card and the payment terminal.

When a contactless card is used for payment, it emits a radio frequency signal that is picked up by the payment terminal. This signal includes the necessary information for the payment, such as the card number and the payment amount. The payment terminal then uses this information to process the transaction.

To ensure security, contactless cards have a limit on the amount that can be spent in a single transaction, typically around $100-$200 depending on the country and bank. Additionally, some contactless cards require a PIN or a signature after a certain number of transactions or a certain amount of money has been spent.

Contactless cards are typically enabled with an RFID chip or antenna, which allows for quick and easy payments at any contactless-enabled payment terminal. They do not require any power source, such as a battery, and can last for several years with regular use.

While contactless cards have become increasingly popular, they do have some limitations. For example, they can only be used at contactless-enabled payment terminals, and they may not be compatible with certain older payment terminals. Additionally, they may not be as convenient as mobile wallets, which can store multiple cards and be accessed via a smartphone or wearable device.

Introduction of Mobile Wallets

As the world becomes more digitized, mobile wallets have emerged as a convenient and secure payment option. Mobile wallets work by storing payment information from multiple cards and allowing users to access that information via a smartphone or wearable device. This makes it possible to make payments without ever having to pull out a physical card.

Mobile wallets use a variety of technologies, including Near Field Communication (NFC), magnetic secure transmission (MST), and Quick Response (QR) codes. NFC and MST allow for contactless payments, while QR codes can be scanned by a payment terminal to initiate a transaction.

Mobile wallets also offer additional security features, such as biometric authentication and the ability to remotely disable the wallet if the device is lost or stolen. Some mobile wallets also offer rewards programs and the ability to track expenses.

While mobile wallets are still relatively new, they are quickly gaining popularity among consumers and businesses alike. According to a study by the National Retail Federation, 53% of retailers plan to accept mobile payments in the near future. The convenience and security of mobile wallets make them a viable alternative to traditional payment methods like contactless cards.

Advantages of Mobile Wallets

Mobile wallets offer many advantages over contactless cards. First and foremost, they provide greater convenience by allowing users to carry all of their payment information in one place. No more fumbling through a wallet or purse to find the right card. With a mobile wallet, you can simply open the app and make a payment with a few taps.

Another advantage of mobile wallets is that they offer enhanced security features. Biometric authentication, such as fingerprint or facial recognition, adds an extra layer of security to ensure that only you can access your payment information. Additionally, if your device is lost or stolen, you can remotely disable the wallet to prevent any unauthorized access.

Mobile wallets also offer the ability to track expenses and manage budgets. Many mobile wallet apps allow users to categorize their expenses and set spending limits for different categories. This can be a useful tool for those who want to stay on top of their finances.

Finally, some mobile wallets offer rewards programs that incentivize users to make payments through the app. These rewards can range from cashback on purchases to discounts at participating merchants.

Contactless Cards vs Mobile Wallets: The Future

As we look to the future of payment technology, one thing is clear: both contactless cards and mobile wallets are here to stay. While mobile wallets offer some advantages over contactless cards, such as enhanced security and the ability to track expenses and earn rewards, contactless cards are still widely used and accepted by most retailers.

However, we will likely see a shift towards mobile payments in the coming years as more retailers adopt the technology and consumers become more comfortable with using their mobile devices for financial transactions. In fact, a recent survey found that over half of respondents said they would use mobile payments more frequently if more stores accepted them.

Another factor that could push consumers towards mobile wallets is the rise of digital currencies such as Bitcoin and Ethereum. While these currencies are not yet widely accepted by most retailers, some mobile wallets have already added support for these digital currencies, giving users even more options when it comes to making payments.

In the end, the future of payment technology will likely involve a combination of both contactless cards and mobile wallets, with each offering its own unique advantages and use cases.

Whether you prefer to pay with your mobile device or a contactless card, one thing is for certain: the way we pay for goods and services is changing, and it’s important to stay up-to-date with the latest trends and technologies.

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