- [Narrator] Go through checkout,
tap your card and there,
you paid in less than two seconds.
It's faster than, hold on,
(machine blips)
this and safer than this.
That quick exchange is thanks in large part to these,
just a few little wires
that make contactless payments possible.
Here's a look inside the tech that makes those payments
both quick and secure and why tap-to-pay
has taken so long to gain traction in the US.
This is the tech behind tap-to-pay.
(machine beeps)
At the heart of tap-to-pay is a technology called NFC,
or near field communication, which itself is a specific form
of RFID or radio frequency identification.
You might be familiar with it
as a way to unlock your hotel room, for example.
NFC relies on those little wires
which are actually antennas.
- The antenna looks like a racetrack and it's a coil
of different wires and that's what's used
to basically transmit the radio frequency on both sides.
- [Narrator] This is Mike Maclennan.
He's the general manager of hardware at Square,
a company that makes card readers.
And he cracked one open to show us
exactly how a tap-to-pay transaction works.
- Reminds me a lot of opening oysters.
- [Narrator] Card readers also have those antennas.
- This is the NFC antenna, so this is the magic
of what makes NFC transactions work and you can see,
once we pull it off how thin the NFC antenna is.
- [Narrator] The card and the reader
are what he calls passive and active connections.
The reader is active because it has power,
and can initiate radio communication on its own.
And the card is passive because it doesn't have power
and needs to be near an active source
to initiate that communication.
Tapping your phone works the same way,
because your phone emulates the passive card.
- What's happening right now is the coil in here is active
and it's looking for a card, basically,
anywhere within this region up here.
- [Narrator] It's doing that using a radio frequency
specific to NFC devices, which only works
at a very short range, a maximum of about four centimeters.
And when the reader finds the card,
it requests the information needed for payment.
That information is stored here in your card's chip.
One thing it stores is what's known as static data,
meaning information that's the same
every time you use your card.
That's things like the account number and expiration date.
It's what's sent from your card's magnetic stripe
when you swipe.
But your chip doesn't just send that static data
when you tap, it also sends something called a cryptogram,
a unique string of numbers the issuers use to verify
that your card is valid.
- What the card is doing is it's collecting information
from the reader about the transaction,
about the reader specifically, and it's combining that
with the the card information using its cryptographic key
to create a unique number for that transaction.
That's what makes it really hard to replicate
a card fraudulently is because the card needs
to have a cryptographic key
that lets them generate that secret code.
- [Narrator] That information is fed through this,
the payment board which sorts to the data
that needs from the card
and puts it all into an encrypted package.
That package then gets sent off to the main board,
which then.
- Sends that on to our servers, which then send it on
to the networks like Visa, MasterCard, AMEX,
which then send it on to the issuer and then back
with the approval message.
Once you get to this board, it's all encrypted
and protected information and so anything beyond this
will have a high degree of security involved in it.
- [Narrator] All of that happens in just a few seconds,
faster than inserting your chip.
- So when you insert a chip card into a reader,
there's a few back and forths in that communication
whereas in contactless, there's just fewer back and forth.
It was just built as a more efficient,
more streamlined, only the bare necessities
kind of information being passed back and forth.
- [Narrator] Card networks and security experts say
that this is also more secure
than other ways you can use your card.
Unlike swiping, your static data
is better protected during that communication.
And because it doesn't have contact with the reader,
it's not susceptible to malware
that can affect chip insert transactions on rare occasions.
This tap-to-pay technology has taken off
in the last few years, in part because of the push
for contactless during the pandemic.
Square says such payments tripled
between the beginning of 2020 and the end of 2022.
While other countries like the UK have had contactless
integrated into public transportation for years,
it's taken the US more than a decade to get here.
- [Announcer] For a whole new way to pay,
MasterCard introduces Pay Pass.
- US first started issuing tap-to-pay cards in the 2000s.
- [Narrator] Peter Rudegair
is a Wall Street Journal reporter
who covers payments and financial technology.
- Different banks thought it was a cool, new technology
and thought their consumers would really flock to it.
Didn't really work out just because
there were few businesses that were set up
to accept tap-to-pay.
- [Narrator] US Retailers have been slow
to replace payment systems,
in part because they're expensive to change.
In 2022, about 55% of merchants said
they accepted tap-to-pay,
with others saying they were planning on implementing it.
Consumer behaviors are also difficult to change
and the switch to contactless didn't feel urgent.
- It's just often been described
as a solution in search of a problem.
Yes, it might be convenient and yes, it might be safe,
but that's not usually enough
for people to switch their behavior.
- [Narrator] The tech still has room to grow
and the push to integrate it
into more parts of everyday life is working in its favor.
In New York, for example,
subway riders can now tap-to-pay at turnstiles.
- So you have this big push to get tap-to-pay
into more transportation systems
and to get people used to using it every day.
And if you're gonna use tap-to-pay
to get on and off the subway at least twice a day,
maybe you'll also use it for your coffee,
your lunch, your drinks.
At least that's the idea
that the credit card companies hope happens.
- [Narrator] Square and other companies
have also recently released to the functionality
to use the NFC antenna in your phone
as the active connection, essentially putting a reader
in your pocket, which could make it easier
for small retailers to accept card payments.
- This is showing you where it wants you to tap
and so the NFC antenna on your phone is right behind this.
And so when I take my NFC-enabled credit card
and I hold it over there, done, transaction complete.
(bright music)