In the past few years the number of contactless transactions has increased significantly. This along with mandates from the various card schemes mean contactless is becoming more relevant and important within the payments world.
The payments industry is a heavily regulated and complicated field and Contactless payments is one of the more confusing parts of it. Knowing this, NMI (formerly Creditcall) has attempted to provide information to help clear up exactly what contactless is and how it all works.
Unlike for contact EMV transactions, where EMVCo have a unified standard for schemes to follow, each scheme has its own specific way of processing Contactless cards and even differing way to process specific types of cards (EMV and Mag Stripe modes). With this in mind we will explain each scheme separately in detail.
A contactless payment device must be capable of handling either Magnetic Stripe equivalent data (Mag-Stripe mode), Chip data (EMV mode), or both. Contactless cards compatible with this device will also either support one or both of these modes and the mode that is mutually supported by both card and reader is selected as the operating mode of the transaction. If both operating modes are supported by both the device and the contactless card then EMV mode is selected to be used. Individual card scheme rules will dictate whether each of the modes are prohibited, permitted or mandated for each market.
Magnetic Stripe equivalent data is different from the physical Magnetic Stripe data as it requires a contactless kernel to complete transactions using APDU commands in a similar manner to EMV mode, but Track 1 and Track 2 Equivalent Data will still be sent online to the issuer for authorisation in a format similar to that used for traditional magnetic stripe transactions.
Transactions processed using EMV mode may not always require online authorisation; the time taken to complete transactions will decrease for those that are processed entirely offline. EMV mode transactions also exchange and validate many data elements between the card and device allowing for increased security within transactions.
As mentioned previously, each card scheme defines their own requirements for contactless cards that comply with that scheme’s specifications. In order to allow a terminal to be able to support multiple schemes, it is necessary for the EMV kernel being used to perform some common Application Selection and Kernel Activation to allow it to determine the applicable scheme rules that should be applied – this is known as Entry Point processing. Irrespective of which card scheme is being used, some general requirements that apply to all terminals are described in the section on System Processes.
For further details about the processing requirements for each of these schemes, refer to the following sections: