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Merchants who are keen to ensure business continuity are accelerating the use of contactless payments. Image Credit: File photo

The new health measures triggered by COVID-19 such as social distancing and contactless interactions are acting as a catalyst for businesses in the UAE to embark on complete digital transformation. Those merchants who are keen to ensure business continuity and stay operational are accelerating the use of contactless and online payments. As a consumer, you will not be needed to swipe a card, punch in your PIN or sign a receipt at the checkout counter for much longer.

The use of banknotes is dropping at a higher speed as it poses the risk of being a potential carrier of germs. The COVID-19 crisis is likely to result in changed payment behavior.

Digital payments are already highly preferred in the UAE. According to a Department of Economic Development survey, 84 per cent of customers considered card payments to be more secure than cash. And contactless payment through cards and digital wallets like EmiratesNBD Pay, Beam, Etisalat Wallet, Apple Pay, Google Play and Samsung Play comprised 25 per cent of all transactions in 2018 in the UAE. The COVID-19 crisis will accelerate their adoption.

25%


Share of contactless payments in all UAE transactions in 2018

How contactless cards work

Contactless cards work either using radio frequency identification (RFID) or near-field communication (NFIC) through embedded chips. Your card or device should ideally be placed 2 centimetres or 4 centimetres from the payment machine to enable the transaction to go through.

The contactless payment industry is also seeing exponential growth globally. According to MarketsandMarkets, the global contactless payment market is expected to hit $10.3 billion (Dh37.8 billion) in 2020 and reach $18 billion (Dh66.1 billion) by 2025, witnessing a CAGR (Compound Annual Growth Rate) of 11.7 per cent between 2020 and 2025.

There has been concern during the current crisis that the novel coronavirus can be spread through cash/banknotes

- M.R. Raghu, Managing Director, Marmore MENA Intelligence

“There has been concern during the current crisis that the novel coronavirus can be spread through cash/banknotes and so many shops and establishments increasingly prefer digital payments that are quick, clean and easy compared to cash payments,” said M.R. Raghu, Managing Director, Marmore MENA Intelligence.

Prior to the coronavirus outbreak, the UAE hosted some of the largest online retailers such as Souq.com and Noon.com, and now, almost all businesses are transitioning to contactless payments to remain operational. With the UAE Central Bank also advising everyone to adopt mobile payments, more and more merchants will migrate to contactless payments if they are not offering it already.

Ali Shabdar, MEA Regional Director at Zoho Corp

“It is expected that contactless payment methods at stores will grow by another 10 per cent to 20 per cent this year alone. Major outlets are going fully contactless. The UAE has been among the top countries in the adoption of contactless payments. The high technology literacy of its residents and implementation of the right infrastructure by retailers and financial institutions have boosted this adoption,” said Ali Shabdar, MEA Regional Director at Zoho Corp, a global technology major.

Exercise caution

Most contactless payments can be done through credit/debit cards using the ‘tap to pay’ feature, which does not require an additional PIN. This means you don’t have to touch the payment terminal or exchange cash. However, if your card gets stolen, it can be used by whoever has stolen it until it gets deactivated. You can set limits on such payments. Most cards come with a pre-set limit in the range of Dh100 to Dh300. You can change these limits calling your card issuer.

Or, a safer option is digital wallets like Apple Pay where you link your debit/credit card details to your smartphone to make mobile payments. Make sure your phone is password protected and has the tracking feature enabled. Create a strong password for the digital wallet app and update it frequently. Also, banks must have strong measures to protect customers against stolen cards, namely preset transaction limits and fraud insurance.

Digital Wallets
With digital wallets, you link your debit/credit card details to your smartphone to make mobile payments. Image Credit: File photo

“Such sudden shifts can be dangerous as they might be a fresh concept for both organisations and consumers, providing ground for cyber-attack groups and phishers to take advantage of and target cyber vulnerabilities in businesses or ill-informed users,” explained George Stoyanov, Transformation Advisory Partner, Grant Thornton UAE.

Beware of phishing scams

“Users need to utilise well-known and trust-worthy platforms that support safe payment gateways that ask for essential banking information only. They also need to avoid using unknown third-party payment mediators as much as possible. Phishing scams are increasing and that is something all consumers need to be aware of: divulging confidential bank information over phone calls, emails, or text messages should be strictly avoided,” Stoyanov highlighted.

Divulging confidential bank information over phone calls, emails, or text messages should be strictly avoided

- George Stoyanov, Transformation Advisory Partner, Grant Thornton UAE

Contactless cards or device payments are quite safe, especially compared to the cash or card and pin combination. Such cards usually have a low transaction limit, a short read range and unique encryption, making them tough to counterfeit. Meanwhile, mobile payments can be secured by biometric requirements such as a fingerprint scan or facial recognition.

“NFC technology is used to transmit data within a very short range, 4 centimeters or less. This makes the technology virtually immune to RFID signal data theft. Stealing card information even within a very close distance in the absence of a point-of-sale machine is also next to impossible,” Shabdar added.

As contactless payment is slowly gaining currency, ask retailers if this mode of payment is available if they don’t expressly offer it. Don’t forget to check how much you were charged since the convenience of contactless payment may lead to overlooking the possible mistake at the counter. Also, make sure to remove the card you want to use from your wallet and tap on the machine. If you have more than one contactless card in your wallet, this could result in confusion.

NFC card
With contactless cards, NFC technology is used to transmit data within a very short range, 4 centimeters or less. Image Credit: File photo

Peer-to-peer payment platforms

Besides digital wallets and contactless payments, there are also online peer-to-peer payment platforms like PayPal and Venmo. “Venmo is free to use and is mostly used to transfer money between friends and the transaction can be shared like in social media. Venmo cannot be used to pay merchants and has limits for transactions. PayPal does not have those restrictions, but charges users a transaction fee of 2.9 percent. Venmo is very popular among millennials and Gen-Z in the UAE and is likely to be adopted more as we move to a less-cash society post COVID-19,” added Raghu.

2.9%


Transaction fee charged by PayPal

Given the surge in online purchases, users are advised to share their banking details with one trusted platform as opposed to spreading that information across multiple e-commerce websites.

“PayPal has been increasingly gaining popularity for that purpose as well as being a convenient and safe gateway that can help with purchases and be used for person-to-person transfers as well,” explained Stoyanov.

Use of digital currencies

According to a recent survey by the Economist Intelligence Unit (EIU), digital currencies like bitcoins and central bank digital currency (CBDC) will get a boost from the COVID-19 pandemic. Around 20 per cent of survey respondents said they don’t currently use digital currencies but plan to in the next year, higher than any other payment method studied in the research, a trend that may accelerate as a result of Covid-19; 54 per cent of respondents said they would consider a digital currency issued by their government (a CBDC) trustworthy, compared to only 26 per cent who said the same about currently available cryptocurrencies; however, cryptocurrency was the most recognised type of digital currency in the study.

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Bitcoin
Digital currencies like bitcoins are likely to get a boost from the COVID-19 pandemic. Image Credit: File photo

“Digital currencies are a form of ‘electronic money’, or money that is a digital representation of government-regulated fiat currencies. It promises a transaction system where individuals/entities will have full rights and control over an asset and be able to instantly transfer it to any person, company or machine, without having to rely on third party intermediaries such as lawyers, brokers and bankers. Given that it’s digital in nature, it is important to ensure that users are transacting on secured exchanges,” explained Shailesh Dash, Board Member of Allied Investment Partners.

Digital currencies are a form of ‘electronic money’, or money that is a digital representation of government-regulated fiat currencies

- Shailesh Dash, Board Member of Allied Investment Partners

China and Sweden were already looking at digital currency as potential pillars of their monetary systems. For other countries, maybe it takes an emergency like COVID-19 to move the needle, said the EIU report.

“It is an opportune time for central banks and governments to transit into the adoption of digital currency. For example, China has become the first major economy to explore launching its own digital currency, which will be tightly controlled by the People’s Bank of China rather than operating on a de-centralised system that underlies cryptocurrencies like Bitcoin and does not require administration from a central authority,” added Dash.

Digital currencies are not immune to phishing either. The best way to protect oneself would be to ensure that one trades on or uses secure platforms that protect user data.

Common risks posed by digital payments and how to address it
• As no pin code is required, if the user’s card is stolen, the thief could make purchases using the tap and go function with ease. In case the card is lost or stolen, customers can block usage of the card instantly through their mobile banking app or by calling the bank’s call centre.

• There is the chance of a thief stealing a ‘tap and go’ card and making multiple purchases in succession. But, the payments authorised through ‘tap and go’ feature are limited to a few hundreds of dirhams only and the potential losses in the event of a lost card are relatively small. Most of these cards also come with security features like SMS alerts when a payment goes through.

• If your smartphone gets stolen, the thief could use your digital wallet to make mobile payments. To prevent this, make sure your phone is password protected and has the tracking feature enabled. Secure it with biometrics such as a fingerprint scan or facial recognition. Create a strong password for the digital wallet app and update it frequently.

• Cyber-attack groups and phishers could take advantage of and target cyber vulnerabilities in businesses or ill-informed users. Make use of only well-known and trustworthy platforms that support safe payment gateways. Do not divulge confidential bank information over phone calls, emails, or text messages.