Pop quiz: How often have you left your wallet at home and relied on your phone to pay at the supermarket or your favorite retail store? If it's pretty often, you're not alone. According to our Retail Report, 27% of consumers no longer carry a wallet. Instead, they rely on making contactless payments through their phones.
Indeed, contactless payments have been gaining traction for the past few years, and this is one trend that is set to grow in the near future.
What are contactless payments?
Contactless payments (also known as "touchless payments") are a secure payment method that allows consumers to pay by tapping or waving their contactless card or phone against a payment terminal.
It's a fast and straightforward process for consumers. As long as the retailer uses payment terminals that can accept contactless payments, customers are able to effortlessly hold their phone or contactless card close to the device to complete the transaction. Sweet.
How do contactless payments work?
Contactless payments rely on two types of technology: Radio Frequency Identification (RFID) and Near Field Communication (NFC). RFID consists of tags and readers that spot an object, like a credit or debit card, via radio waves.
On the other hand, NFC is a short-range wireless technology that allows two devices to communicate when placed close to each other. This technology connects smartphones, tablets, wearables (like smart watches), and contactless cards. It's most commonly used for payments, coupon downloads, as well as the exchanging of business cards.
How long do contactless payments take to process?
Lightning fast.
Contactless payments usually take a mere few seconds to process and can be even faster than traditional card payments (i.e., swiping the card or keying a PIN).
When a customer taps their card, phone, or wearable device near a contactless payment terminal, it reads the information, authorizes the transaction, and completes the payment process in a few seconds. Because of its fast processing time, contactless payment is both convenient and efficient – a popular choice for customers looking for seamless ways to pay.
How secure are contactless payments?
Contactless payments are more secure than traditional magnetic-stripe cards, which are far easier to clone. They are also harder to hack as they are authenticated payments – the data associated with your credit or debit card on file is encrypted and constantly changing.
This means that contactless payments are not only faster than traditional card payments but also more secure to boot.
Types of contactless payments
There are two main types of contactless payments: credit and debit cards or phones (mobile apps or digital wallets). Customers tend to have specific preferences when it comes to contactless payments, which is essential to cater to – 55% of consumers will leave a store if they are unable to pay how they want for a product or service.
Contactless credit and debit cards
Most credit and debit cards have NFC technology, which enables them to be tapped or held close to a card reader for contactless payments. However, not all cards have this capability – especially the older ones – but it's a trend that we can expect to see more of in the coming years.
Mobile payments
Contactless cards aren't the only way for your customers to tap to pay. Digital wallets like Apple Pay, Google Pay™️, and Samsung Pay also use NFC protocol. Shoppers can use their phones to access these digital wallets and complete in-store transactions without their physical credit or debit cards.
Additionally, digital wallets are helpful for making larger purchases as customers can use them to authorize amounts over the limit on contactless payments (more on that below!).
The pros and cons of contactless payments
Like other payment methods, contactless payments also have its benefits and disadvantages. Here's a list of the pros and cons of enabling customers to pay with contactless payment methods.
Speed: Contactless payments are usually faster than traditional methods, enabling customers a seamless and efficient payment experience, especially during busy periods.
Cons
Transaction limits: Some contactless payment methods limit the value of transactions before additional verification is needed. This may cause friction and inconvenience for customers making higher-value purchases.
Convenience: Customers can make purchases by tapping their card, phone, or wearable device, reducing the need for PINs or signatures.
Cons
Compatibility: Most modern payment terminals support contactless payments. However, some businesses may be unable to accept payment using these methods.
Security: Contactless payments use encryption technology to protect credit or debit card data. Compared to traditional magnetic stripe cards, they reduce the risk of fraud.
Cons
Security: While contactless payments are considered more secure than traditional credit or debit card payments, unauthorized transactions could still occur if a card or phone is lost and used before it's reported.
Superior customer experiences: This payment method's convenience and speed can lead to seamless and easy payment experiences that customers are looking for.
Cons
Accepting contactless payments
As most modern in-person payment terminals are NFC-enabled, it might be pretty simple to start accepting contactless or touchless payments with them.
Contact your payment service provider, who can guide you through accepting contactless payments through your existing payment hardware.
Tap, tap, revolution: What does the future hold for contactless payments?
As more and more credit or debit cards come equipped with NFC technology, contactless payments will only grow in popularity in the near future. Get ahead of the curve and start building payment experiences that include contactless payments to meet the rising expectations of your customers.