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Contactless payment risks highlighted in new TowerGroup study

September 4, 2006

Digital Transactions: A new study by TowerGroup warns of security risks associated with contactless payments. In "Taking Charge: Essentials of U.S. Bank Card Acquiring," the Needham, Mass.-based research firm and consultancy says contactless payments pose certain business risks for acquirers. TowerGroup estimates that acquirers processed 45.5 billion credit, prepaid and signature-debit transactions in 2005; 5 percent of that total, 2.4 billion transactions, was attributed to prepaid-debit products. But the spread of contactless payments presents another challenge for acquirers with big merchants, the study says. Major merchants like Wal-Mart Stores Inc. have been installing sophisticated radio-frequency-identification technology - the same technology on which contactless payments are based - to control inventory and perform other supply-chain functions. Once the use of RFID technology becomes ingrained, "then harnessing the customer data becomes the next step," the study's author told Digital Transactions.

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