Tap Payments: Welcome to No Man’s Land

Once upon a time, if you wanted to pay for something with a credit card, the clerk would run it through a monstrous bulky mechanical device to create a literal physical carbon copy from the embossed surface of your card. If you’re too young to remember this, you haven’t lived. With the coming of the magnetic stripe, we were living in the jet age. The growing demands of speed and security (sometimes friends, sometimes enemies) led to the chip card, and later yet to contactless (“tap”)  payments. But speed at the counter doesn’t always translate to speed of settlement. That could still take days.

 

Instant settlement (more or less synonymous and interchangeable with “instant payment” or “push payment”) is becoming much more common, and is an exciting development. It’s already being introduced on buses and trams to speed up the lines of passengers waiting to get onboard. It’s a welcome development, and a popular one. But tap payments have created a conundrum for dispute resolution.

While standard card-present transactions rely PIN confirmations as protection against chargebacks, tap payments have limited chargeback rights. On the one hand they don’t require a PIN, but on the other they are card present. They’re in no man’s land. The line that divides when there will dispute rights is still being drawn. While merchants have always preferred an immediate settlement of disputes, the lacuna in this case may yield an exception. Or maybe not. We’ll soon know.