Make life easier with cardless payments

Published by Andy Webb on 04 July 2016.
Last updated on 12 July 2017

The popularity of contactless cards has led to talk of a near-cashless economy in the not too distant future. Less than half (45%) of all transactions are now made with coins and notes according to Payments UK.

But even the humble credit and debit card could be at risk thanks to a growing number of digital devices allowing you to make so called “cardless” payments.

Android Pay has launched in the UK this year, joining Apple Pay in allowing you to use your mobile phone to tap and pay.

And it’s not just phones. You can buy wearable payment devices too, such as wristbands, keyfobs and stickers. Plus there are dozens of apps that allow you to pay and go in supermarkets, restaurants and bars without even asking for the bill.

All this choice might seem overwhelming, and a little scary - particularly if you’re worried about the security of your money. To help, we’ve taken a look at how contactless payments work, along with the pros and cons of going cardless.

Paying with your mobile phone

The main cardless technology is the same one that lets you use contactless cards and Oyster cards on Transport for London (TfL).

This means phones with a built-in NFC (Near Field Communication) chip can be tapped onto any contactless payment terminal to make a purchase.

You link your phone’s digital wallet to the debit or credit card of your choice, and the handsets themselves then act in the same way as a card would, debiting money from your accounts or charging to your credit card.

Apple and Google’s Android phones make up the bulk of the mobile market, and the most recent devices usually have an NFC chip (see box for details) already inside them that enables you to use the Apple Pay and Android Pay systems – as long as your bank has signed up to the scheme.

Cardless payment access is expected to be widened by the introduction of Samsung Pay to the UK – the service launched in its native South Korea in August 2015. This will also widen out the locations where you can pay thanks to Samsung’s own technology that imitates the magnetic strips on cards.

The key difference with these systems compared to using contactless cards and credit cards is that there’s no transaction limit, although you are limited by the retailer’s technology when paying over £30 on Apple Pay. The current transaction limit for contactless payments in the UK is £30.

Which phones accept Apple and Android Pay?

Apple: iPhone 5SE, iPhone 6, iPhone 6S, iPhone 6 Plus, iPhone 6S Plus, Apple watch.

Android: Phones running KitKat version 4.4 with an NFC chip. This includes Samsung Galaxy S5 upwards, most Sony Xperia handsets, and most LG phones.

Which providers allow Apple and Android Pay?

Apple: American Express, Bank of Scotland, Barclays, Barclaycard, boon. by Wirecard, First Direct, Halifax, HSBC, Lloyds Bank, M&S Bank (credit card only), MBNA, Nationwide Building Society, NatWest, Royal Bank of Scotland, Santander, Tesco Bank (credit card only), TSB, Ulster Bank.

Android: Bank of Scotland, First Direct, Halifax, HSBC, Lloyds Bank, M&S Bank, MBNA, Nationwide Building Society. 

Correct as on 14 June 2016. 

Paying with wearable tech

Barclaycard’s ‘bPay wearables’ is another option for contactless payments. Available as a wristband, keyfob or sticker, these NFC enabled extras give the chance to go both cardless and phoneless - though you can put the sticker on your mobile. They’re available to anyone with a UK-registered Visa or MasterCard debit or credit card, not just Barclaycard and Barclays customers.

With these devices, which cost between £15 and £32 to buy, you are limited to transactions of £30 and under, and are also dependent on contactless readers to pay.

However, unlike Android and Apple pay, you need to pre-load your bPay device online and top up as needed.

Paying with apps without tapping

There are a number of apps you can download onto your smartphone and connect to your bank account or credit card. With these, there’s no need to tap in restaurants - you can scan a QR code (Quick Response code, a type of matrix barcode) on your bill, enter your table number, or prepay, and the money will be taken from your linked account.

The problem is there are so many and there isn’t a one app fits all solution. Tesco, for example, has its own PayQwiq app (currently only in London and Edinburgh), while Mastercard Qkr, Zapper and Paypal all work at different restaurants. Some restaurants even have their own payment apps - fine if you eat there regularly, but a pain for occasional visits.

You can also use Apple Pay and Android Pay to buy within certain apps on your phone, such as Topshop and JD Sports, and soon you’ll be able to use your phone to pay for items on your Apple computers too.

Are payments secure?

A report last year by analysts Deloitte found the main reason people haven’t used mobile phones to pay in-store was a fear they aren’t secure enough.

But in fact, they’re probably safer than physical cards thanks in part to a system called ‘tokenisation’. According to Mike Cowan, head of digital payments for Mastercard UK and Ireland: “Tokenisation doesn’t use the number that appears on the front of your card. It swaps that out for an alternative version of the card number, which is only used in association with one phone or device.” This means your card details are never given to retailers - cutting the chance of fraudsters getting hold of them.

There are also protections when spending - Apple Pay requires a fingerprint authentication for all purchases, while Android Pay requires confirmation for payments over £30, which could be through a passcode or swipe ID - whatever you’d use to unlock your phone.

And we shouldn’t be worried about the consumer rights and protection that comes with debit and credit card use, such as being able to use Section 75 of the Consumer Credit Act or Chargeback when something goes wrong with a purchase. 

“Using your card in your phone is exactly the same as using your physical card. All the same rules and benefits apply,” says Mr Cowan.

The same also applies to the apps listed above, other than PayPal where in the majority of circumstances you won’t be covered by Section 75 or Chargeback as PayPal being the ‘middleman’ breaks the direct relationship between the retailer and card firm needed to claim. With bPay, you can make a claim under Chargeback, but you’re not covered by the stronger, legally binding Section 75 rules.

The barriers you might face

As you’ll see from my experience of going cardless, it’s not always as simple as it might seem.

The biggest issue is that not all retailers accept contactless payments, though plans are in place to change that. “By 2020 you will be able to pay contactless at every point of sale in Europe,” says Mr Cowan.

And while you don’t need a phone signal or the internet to use contactless payments, your bank will need to support the scheme for you to be able to use it.

Another stumbling point is if you need cash. There aren’t any contactless cash machines, so to withdraw money you’ll still need to carry your debit card.

Battery life could also be a cause for concern. If your battery runs out and you don’t have a backup card, you could be left with no means to pay.

Plus, if you have a phone that’s more than two years old, you might find you need to upgrade to take advantage of contactless payments - unless you’re prepared to shell out for bPay’s technology.

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