As Contactless Payment Soars in Retail, So Does its Vulnerabilities

The current global environment has made contactless payment more popular and necessary than ever before. While over the past few years we’ve seen the rise of contactless payment methods such as NFC or ultrasonic technology, today is arguably the most crucial point for its mass adoption.

A recent study from Mastercard found that nearly eight in 10 consumers say they have used contactless payment options in response to the COVID-19 pandemic. The numbers are backed by proof. Many businesses today have adapted well to the COVID-19 world and are providing unique, creative ways for customers to purchase items.

In March, Walmart announced a no-contact service for payment, pick-up, and delivery in an attempt to protect its customers and employees. Through QR code scanning via the company’s app, in-store shoppers can make contactless purchases. In addition, Walmart customers can also open their trunks and have an employee load their groceries without the need for a signature. Another great example is Sam’s Club's use of contactless technology to allow customers to pay from their phones, skipping the checkout line completely. Much to the customer and company's benefit, Scan & Go usage has increased for Sam's Club fourfold since the start of the pandemic.

With the impending surge of everyday use of contactless payments, businesses have discovered its many benefits as well as its security flags. Inefficiencies in contactless food delivery, ride share, and retail contribute to more than $10 billion in annual losses for businesses, for example. A profound vulnerable aspect of contactless payment lies within authentication. Authentication fraud happens when businesses fail to properly confirm the right item is being sold to the right customer. This is either due to the failure to check identification, improper QR code scanning, or incorrectly paired NFC readings. It’s critical for businesses to invest in the development of a secure infrastructure for their contactless payment options.

For example, a contactless authentication solution through ultrasonic technology is becoming a critical tool for retailers offering contactless payments. This means that a customer can walk into a retail store and be identified automatically via sound. When they’re ready to leave, they pay via mobile and authentication happens at receipt. Another example is when a customer pulls up to a drive-thru restaurant after being identified via sound at the speaker. They pay, authentication occurs, and they receive their order.

In the current climate, technology is advancing and many new products are being developed every day. However, with that comes new susceptibilities that these technologies can face as well as a lack of safeguard infrastructure to prevent continuous fraud and revenue losses. While many benefit from a cohesive customer experience, businesses need to put security first so they can decrease the rate of chargebacks and increase revenue.

Jeff Hudson is head of growth and marketing at LISNR, the most advanced ultrasonic proximity platform.