Contactless payment: What it is and how to accept it from customers


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  1. Introduction
  2. What is contactless payment?
  3. How does contactless payment work?
  4. What forms of contactless payment are there?
  5. Is contactless payment safe?
  6. How to accept contactless payment
  7. Benefits of contactless payment for businesses

If you run a business, you’ve probably encountered contactless payments. Perhaps you’ve wondered if they would be beneficial for your business. Every business owner has to decide whether a particular consumer trend is just a passing fad, irrelevant for their market and customer, or truly worth adopting.

Contactless payment appears to have transcended trend and taken over the payments space. A 2021 report noted that over 80% of retailers used contactless payment methods in the previous 12 months. In addition to widespread retailer adoption, digital wallets are on track to become the most popular online payment method by 2024. And with 15% of consumers reporting that they regularly leave their physical wallets at home, in-person businesses should prepare themselves to accept contactless payments.

From NFC to RFID to tokenisation, the topic of contactless payments can feel a bit daunting. But it’s actually straightforward to understand, and even easier to use as a payment option for your business. Let’s get into it.

What's in this article?

  • What is contactless payment?
  • How does contactless payment work?
  • What forms of contactless payment are there?
  • Is contactless payment secure?
  • How to accept contactless payment
  • Benefits of contactless payment for businesses

What is contactless payment?

Contactless payment is the wireless transmission of payment information between enabled credit cards or mobile devices and a card reader, when the devices are in close proximity. No credit cards are inserted or swiped, and no cash is exchanged.

How does contactless payment work?

Contactless payments use a technology called NFC, which stands for "near-field communication". NFC uses Radio Frequency Identification (RFID) to communicate between the customer’s credit card or mobile device and the card reader, without making physical contact.

What forms of contactless payment are there?

There are two primary ways in which customers can make a contactless payment:

  • NFC-enabled credit and debit cards
    Some cards are equipped with NFC technology that allows them to be tapped or waved near a receptive card reader for contactless payment. Not all cards have this capability, but it’s something that we can expect to see more of in the future.

  • Digital wallets
    Digital wallet technology houses users’ credit and debit card information on their mobile device for use with contactless payments. Customers tap or wave their mobile device near an NFC-equipped card reader, just like they would with an NFC-enabled credit card. The most well-known and widely used digital wallet is Apple Pay, which is compatible with iPhone, iPad and the Apple Watch. Other digital wallets that allow contactless payment include Google Pay, Android Pay, Samsung Pay and PayPal.

Is contactless payment safe?

Even though making payments with a smartphone might inherently feel insecure, it’s generally very safe. Contactless payments have better security and fraud prevention than the other two methods of transmitting credit card information: the magnetic stripe (magstripe) on the card or the chip that most cards have now.

Because magstripes physically contain the credit card account information, they are vulnerable to fraud attempts. It’s simple to clone cards once you have the account information.

Most forms of contactless payment don’t transmit unencrypted credit card numbers during transactions. Instead, they use tokenisation to encrypt the credit card data, and then they transmit this encrypted data to process the payment. Even if there were a payment terminal security breach, this encryption would make it more difficult for the offending party to run off with customer credit card information.

EMV chip card payments also transmit encrypted codes to card readers during in-person transactions. In fact, many cards with EMV chips are also enabled for contactless NFC payments. But digital wallet contactless payments are still more secure, due to one feature that EMV chips can’t offer: the ability to leave physical cards at home. Cardholders don’t have to carry their physical cards and risk them being stolen.

How to accept contactless payment

If you already accept credit card payments in person, it might be easy to add contactless payments as an option for your customers. Contact your provider to find out what additional steps, if any, you need to take to accept contactless payments with your POS system or card reader. Unless your business accepts credit and debit card payments on older machines, it’s likely that your equipment is already enabled for contactless payments.

Benefits of contactless payment for businesses

In addition to security and fraud protection, there are plenty of other benefits to adopting contactless payments.

  • Your customers want to use it
    Consumers are clear that they love and want to use contactless payment. In an American Express survey, 70% of businesses reported that their customers requested contactless payment options, and nearly 30% of consumers said that they would use contactless payment more often if it was available in more places.

  • It makes checking out fast and easy
    Contactless payments are up to 10x faster than other payment methods. If your business is prone to long queues, this will speed up your checkout process. And even if you don’t get queues down the street, your customers probably wouldn’t mind saving a little time while checking out.

  • It doesn’t have to cost extra
    While many businesses think that contactless payment is a more expensive payment option, it depends on the payment processing provider that you use. Stripe customers don’t pay any additional fees to process Apple Pay, and the pricing per transaction is the same as other card transactions. Other payment processing providers may charge businesses fees for accepting Apple Pay.

  • It’s more sanitary than cash
    During the COVID-19 pandemic, retailers and their customers became acutely aware of how often they’re making physical contact and potentially spreading germs. Seventy-three percent of businesses reported that, since the COVID-19 outbreak, they prefer cashless payment methods.

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