Contactless Card Sleeves Opportunity Is Up, But Demand Likely Is Low

Contactless card issuance continues to grow, creating an opportunity for providers of sleeves designed to protect such cards to prosper. But the need for such a security measure may be low, one analyst contends.

The San Diego-based Institute for Consumer Financial Education claims it has received more calls about funds being stolen from contactless cards, so it has started again to promote its card sleeves to protect against such offenses, Paul Richard, company president, tells PaymentsSource.

“We’ve gone from having maybe one call per week to a couple of calls per day,” he says. The institute has no stats on actual contactless card fraud.

The laminated sleeve has a shielding substance called a substrate that prevents hackers from capturing card data using a Radio Frequency Identification scanner that can read contactless signals from several meters away. Once the crooks have such information, they may be able to create counterfeit cards and drain accounts or tap lines of credit.

The institute was one of the first organizations to launch card sleeves in the 1990s, which it initially called them “the credit card condom.” The earlier sleeve protected the card magnetic stripe from damage, says Richard.

The company sells the shielding sleeves, renamed because the racy condom name did not attract consumers, directly to consumers through its organization in packs of 10 for $10 plus shipping, he says. The institute does not guarantee against losses if fraud results from data being scanned from shielded cards.

The sleeves may be a crafty idea, but consumers and banks likely will not want or need such a device, one analyst says.

 “Consumers are not worried enough, and they do not want to be bothered by security over convenience,” Avivah Litan, security analyst at Gartner Group, tells PaymentsSource.

The only way consumers might comply is if the handset manufacturers adopted sleeves, she notes.

“There are too many other fraud protections, including zero-liability (protections) from banks,” Litan says. “Consumers don’t need more than that.”

In February, Tyfone Inc. partnered with smartphone-accessory company Dexim Inc. to offer a sleeve that attaches to Apple Inc.’s iPhone. That sleeve, however, supported contactless payments using Tyfone’s SideTap microSD chip technology (see story).

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