Payment Cards

Card Features

The key points to note on the front of the card are:

the issuing company of the card (e.g. American Express, Morgan Stanley, etc.)
the card has an individual number unique to that card
the card will show the date from which it can be used, 'valid from' date, and the date until which it can be used, 'expiry date'. The card is not valid outside of these two dates, and
the name of the card holder.

The reverse of the card has the following main details:

a black magnetic strip which has encoded on it all of the details required for a computer to read the card, and
the card holder's specimen signature.

Cards may also include additional security features such as a photograph of the account holder and holographic images. The UK has introduced a security system called 'chip and pin' under which cardholders may be asked to key in a personal four digit number when they pay with their card, rather than signing their name.

5.2 DEBIT CARDS

A debit card is a method of making a payment straight from an individual's bank account without writing a cheque.

If goods are purchased using a debit card (which looks similar to a credit card) then the card is processed in the same way as a credit card with a voucher being signed by the purchaser. The difference is that the purchaser's bank account is debited immediately with the amount of the purchase.

Depending upon the type of debit card that is used, the processing will take place either through the credit card system or through an EFTPOS (Electronic Funds Transfer at Point of Sale) system. EFTPOS enables the instant transfer of funds from the bank account of the purchaser to the account of the seller. This method of payment is very common for payments made by individuals, for example, when shopping or purchasing goods online.

5.3 CREDIT CARDS AND CHARGE CARDS

It is worth briefly distinguishing between a credit card and a charge card.

Credit cards are designed to give the holder choice as to whether to pay off all or only some of the outstanding balance on the card at the end of each month. If a balance remains at the end of the month then the holder will be charged interest on the outstanding amount.

A charge card however differs in this respect as the balance must be cleared in full at the end of each month. Popular examples of charge cards are American Express and Diners Club. The card provider may also charge an annual fee.

As far as the retailer is concerned the procedures for accepting payment by a credit card or a charge card will be very similar.

5.4 CONTACTLESS PAYMENTS

In recent years, many banks, retailers and other entities have developed and Introduced contactless methods of payment. This may be part of the increased functionality offered by a debit or credit card, or may relate to other devices such as smartcards and smartphones.

When a debit card or credit card is capable of making contactless payments, the following symbol is normally visible on the card.

Similarly, retailers will display the symbol to indicate that contactless payment can be made by their customers.

One of the principal reasons why retailers introduced methods of contactless payment is to improve the speed of making transactions without customers having to sign a receipt or to use their pin number to authorise a transaction. A retailer needs to have a point-of-sale terminal that supports contactless payments. Most modern point-of-sale terminals used by retailers support both contactless payments and payments made using pin numbers. Consequently, contactless payments are often used for transactions of a relatively low value, such as the purchase of drinks and snacks in a coffee house, or to make payment for purchases in a supermarket.

In the UK, the limit for a contactless payment was initially set at £30, subsequently rising to £45 and is currently £100. The security feature that requires pin authorisation of a payment after regular use for contactless payments has also gradually increased over time.

Smartcards may be used for a wide range of activities, including the purchase and use of travel tickets. For example, Transport for London introduced the Oyster card which is a contactless smartcard that records the purchase and use of travel tickets, including season tickets. Examples of similar smartcards that record purchase and use of travel tickets include the PRESTO card in Toronto, the MetroCard in New York and the RioCard in Rio de Janeiro.

Apple Pay uses debit or credit card information linked with the card to make payments. Payments can be made by Apple Pay when using an iPhone, iPad, Apple Watch or Mac. Google introduced a similar system for android devices called Android Pay in the United States of America in 2015 which was introduced in the United Kingdom in the following year. Both payment methods now also include the facility to make payment for purchases within apps. It is possible to use Apple Pay or Android Pay for purchase transactions in excess of the contactless payment limit, in which case it is treated as a normal debit or credit card payment.

As with any payment system, it is essential that there are robust and reliable controls that minimise the risk of error or abuse resulting from loss or theft of any card or device which can be used for contactless payments. One key security feature is that the retailer does not have access to the customer credit or credit card number.

Controls that may be applied relating to the security of contactless payments include the following:

customer choice whether or not to make contactless payments
the customer has the right to request a receipt as evidence that the transaction that has taken place
the customer has the right to challenge or query the legitimacy of a contactless payment that appears on their statement
a maximum monetary limit placed on the value of a contactless payment -either by paying bank or by the retailer to limit their exposure to risk of loss resulting from misuse of lost or stolen cards
a limit or restriction on the number of contactless payments that can be made before the bank or credit card company require authorisation of a transaction (e.g. by the customer using their chip-and-pin number) to confirm that they are the valid user of the card
data transmitted following authorisation of a transaction is encrypted and only the paying bank or card company will be able to match the transaction code with the account holder.