AS LOCAL banks rush to introduce a system that will revolutionise the way we pay in shops and restaurants officials are finalising the rules for these transactions.

The Payment Association of South Africa (Pasa) says the clearing rules, which will guide interbank transactions for a contactless payment system, will be ready in the first quarter of 2013.

Near-field communications payment is a quick "tap-and-go" system that allows radio signals between two devices, so money is moved from the customer's bank to that of the shop.

The new rules will form a subset of the existing clearing house rules for debit card payment. A transaction limit will be agreed on, below which payments will be made offline without card- holder verification, which is particularly useful when speed is important, such as at tollgates.

Pasa CEO Walter Volker said: "Below this agreed amount, banks which issue contactless cards will not be able to charge back or return the transaction to the merchant's bank if the card holder disputes that they performed the transaction."

This means that if clients deny making these payments, they will not be refunded by either the bank or the retailer.

Pasa's rules are meant to bring clarity and legal certainty to participants offering these transactions.

Small contactless payments in South Africa are also exempt from the Financial Intelligence Centre Act.

Standard Bank has already introduced the Muvo transit card in Durban for commuters using the People Mover and Durban Transport buses. These cards are reloadable and can be used as a standard MasterCard, as well as for contactless payment. Absa has a similar offering for MyCiTi,Cape Town's bus service.

Now banks must issue cards with contactless capabilities — and merchants willing to accept payment from these cards must get near-field communications devices. "Market forces will dictate how fast the infrastructure and products evolve to see a wide uptake of these instruments," Volker said.

The head of Absa's consumer banking unit, Simon Just, said he believed South Africa was "better positioned" than some other countries that had to rely on retail alone for the expansion of tap-and-go systems standard to all banks. "It is early days, but as retailers increase their use it will become part of everyday life for South Africans," he said.

Cashless payment systems have been piloted at numerous events , including the Easter Rugby festival in Gauteng and Oppikoppi in Limpopo.

Contactless card payments are just a precursor to the use of cellphones for payment in retailers.

Although the near-field communications standards are still being finalised by manufacturers and network operators worldwide, global card schemes and the payments industry are confident that MasterCard PayPass and Visa payWave on cellphones will be the facilitators of mobile payments, using the same readers now being installed in shops.

FNB's core banking solutions CEO, Irlon Terblanche, said the system was much safer than the magnetic stripe card transactions and "these contactless transactions are governed by stringent security standards". His confidence in the system was echoed by Volker, who said all the near-field communications cards used the latest chip technology, which came with secure encryption technology to prevent thieves from "scanning" wallets in clients' pockets.

* This article was first published in Sunday Times: Money & Careers