The big question for chip cards is….Which one is more secure and at the same time cheaper : Contact or Contact less Card? Like all good questions, the question itself is short, but the answer could be complex…and debatable too when most of the markets are migrating to CHIP based acceptance.
First, it is important to understand that there is no such thing in the payment system that is 100% secure. Also consider that security is measured in terms of time and money, and should be offset to risk. It is considered that an object is secure when the amount of time and money an attacker has to spend to exploit the object exceeds the worth of the object.
After having said so, to a large degree, the security depends on the capabilities of the chip, since there are so many variations, cheaper & less secure, expensive & more secure. Manufacturers employ different security mechanisms, which requires specialists to compare before the same is considered good and viable for the market.
If we discuss the cost implication, we have to consider every factors in terms of issuer and acquirer. If cost of the card is more for issuer, the same cost will be passed on to the cardholder and the merchant to some extent. We have also to consider security aspects of the cards in terms of various parameters and guidelines as laid down by EMV standards.
The pricing difference between contact and contact less payment cards is not that wide. However when considering contact less, we have to take into consideration where the customers will be using their cards most often and whether those locations have contact less readers. If the presence of contact less readers in the acquiring arena is low, then there will few places where it can be used, and as such may not be worth compared to investment. However, we know that these days devices with dual acceptance facility is also available. If there is a trend in the market, devices with dual capability can be deployed at a cost to the bank. This will guarantee acceptance of both contact and contact less cards.
I am not talking only about point of sales. It is ATM also, which requires a major upgrade. In most of the market, there are very few ATMs supporting contact less only cards. So if cash withdrawals is a major part of Bank’s business, services will be hit if the Bank decides to issue only contact less cards. Here the choice of dual interface should be considered for ATM also.
An issuer also has to consider the ratio of transactions acquired on own acceptance terminals(on-us) versus the number of transactions acquirer by other institutions(not-on-us). If most of the transactions are on-us, then Bank may have some liberty on choosing acquiring devices, which suits their cards most. In most environments, this is however not the case and acceptance of a card type is determined by acquirer bank based on Central Bank guidelines. Like in India, the Reserve bank allows free usage of cards on other Bank’s ATMs at no cost to the cardholder. So the acquirer banks not providing ATMs capable of accepting all types of cards will be having very less hit.
If chip has both standard EMV contact and contact less, chip costs can increase many fold. Contact less terminals are still a rare in most of the market – and often the merchant don’t know what to do with it and try to ask the customer for signatures where these are not necessary. In that case, merchant training could be another cost to Bank for deploying these types of cards.