The age of contactless

Contactless payments are becoming increasingly common in Switzerland, now accounting for nearly one-third of all transactions. Prof. Edoardo Beretta, Professor at the Faculty of Economics of Università della Svizzera italiana (USI), reflected on the risks associated with them in an article published by Corriere del Ticino.

Contactless payment refers to the use of smartphones or smartwatches for transactions, serving as an alternative to debit or credit cards and cash. While it is true that the choice of payment method is often influenced by the amount being paid—cash, for instance, is primarily used for amounts under 20 francs—contactless payment methods are increasingly utilised regardless of the transaction amount. This trend is supported by a study conducted by the University of St. Gallen (HSG) and the Zurich University of Applied Sciences (ZHAW).).

The popularity of contactless payments could also depend on the fact that it is a secure method, as confirmed by Professor Edoardo Beretta: "The process of making digital payments, whether in physical stores or online, is generally secure. However, the level of security can vary based on factors such as the type of network connection, the update status of the device being used, and the implementation of multi-factor authentication. These devices serve as "windows to the world," providing numerous opportunities but also presenting certain risks. This vulnerability arises from their constant connectivity and the immediacy of their processes."

However, as the USI professor pointed out, relying on a single form of payment could be risky: "Only paper money and minted coins are classified as central bank money. This type of money is directly issued by central banking institutions and is held by economic entities other than banks, such as consumers. Everything else is considered commercial bank money, which is traceable to individual banking institutions. Relying too heavily on specific forms of payment—especially digital ones—can be risky. This is because digital payments depend on factors such as reliable energy supply and the proper functioning of payment systems. Therefore, it is not advisable to rely excessively on any single payment method for the sake of risk diversification."

Contactless payments also conceal a further risk: "Numerous studies have shown that digital payments, particularly those that allow purchases on credit and are used without a strong financial understanding, can lead to over-indebtedness among individuals. This finding is not surprising, as people are generally accustomed to handling physical cash. When paying in cash, individuals are more likely to notice the progressive lightening of their wallet, which serves as a clear signal to monitor their spending to avoid running out of money and losing their purchasing power, at least temporarily." Professor Beretta explains that it is crucial to monitor digital payments to maintain regular oversight and prevent excessive expenses.

The world of digital payments is constantly evolving: in China, a new payment method has been introduced that allows transactions to be made by passing the palm over a sensor. Although Professor Beretta does not expect such a method to become particularly widespread in Switzerland, he does not rule out the possibility that new methods may be introduced in the near future that will make payments even faster: "Fast payment methods that utilise sensitive data, such as palm reading or facial recognition, tend to be more accepted in countries where there is already a strong inclination toward societal control or in regions influenced by Big Tech. This scenario calls for careful consideration. In the realm of payment instruments, the next potential developments lie in biometric payments, which encompass fingerprint scanning, iris recognition, facial recognition, and voice identification, among others. These innovations undoubtedly represent a new frontier in payment technology."

The full interview with Professor Beretta, edited by Il Corriere del Ticino, is available at the following link. (Italian only)