A contactless payment is a type of transaction made by tapping a device (such as a smartphone or contactless bank card) onto a payment terminal.
As the name suggests, the entire transaction is made without physically touching a PIN terminal. Shoppers use their smartphone,mobile wallet, or contactless credit card to tap a card reader—hence the name "tap to pay." They’re then billed for their purchase after the wireless connection is made.
In 2020, it was estimated that760 million usersmade a contactless payment.
Revenue generated through contactless methods in the US alone is projected to hit$358 billion by 2025.
Want to get in on the action? In this article, we’ll take a look at how contactless payments work, the advantages for retailers, and how to offer contactless payments to in-store shoppers.
Keep reading to learn:
What is a contactless payment?
Contactless payments are types of transactions completed using a mobile phone, contactless-enabled debit card, or key fob. The device is placed within close proximity to thepoint-of-sale (POS)terminal. When a wireless connection has been made, the shopper’s bank account will trigger a payment to your business.
The entire checkout experience is faster and easier when shoppers use contactless. Unlike chip and PIN cards (where customers need to hang around and enter their PIN), contactless payments are finalized within a matter of seconds.
How do contactless payments work?
Contactless payments are made using two types of payment technology: radio frequency identification and near-field communication.
Radio frequency identification (RFID)
Contactless credit, debit, and smartcards have microchips inside (similar to the visible one scanned by the machine when a card is inserted). When a contactless payment is made, the antenna on thecredit card readerpings.RFID technologyinside the contactless card makes contact with the antenna and the payment is processed wirelessly.
Near-field communication (NFC)
Smartphones store a shopper’s credit card information in a mobile wallet. These smartphones useNFC technologyto find a nearby payment terminal, send an encryption key to accept the payment from the mobile wallet, and process a receipt. This is how Apple Pay, Google Pay, Android Pay, and Samsung Pay work. It’s also how payment fobs and wearable devices process contactless card payments.
Start taking contactless payments instantly
Every Shopify plan includes built-in payments processing with quick payouts and low rates, starting from 2.4% + 0c USD. Skip lengthy third-party activations, accept all popular payment methods (including contactless!), and start taking payments online and in-person faster.
Types of contactless payments
There are few different options for customers when it comes to contactless payments, including: cards with NFC technology, mobile wallets, and QR codes.
Cards with NFC technology
Popular banks are building contactless technology into their customers’ credit and debit cards. Visa, Mastercard, and American Express all have EMV chips in their smartcards. Customers can find whether their card is contactless by looking for the contactless symbol.
Mobile wallets
Another popular contactless payment method is mobile wallets ortap to pay. Most mobile devices—including Samsung, Apple Pay, and Google Pay—have radio-frequency identification (RFID) built in. All a shopper needs to do is add their credit or debit card to the digital wallet, open up the app, and tap their phone onto a and tap their phone onto aPOS terminalto make a purchase to make a purchase.
Mobile phone companies have an extra layer of security for contactless payments in the form of biometric verification.
Samsung Pay, for example, uses facial recognition technology to verify that the person using the mobile phone is the owner of it. Similarly, Apple Pay prompts people to enter their fingerprint ID to complete a contactless sale.
QR codes
Not all contactless payments have to be done through a and tap their phone onto aPOS terminalto make a purchase. Retailers can useQR codesfor touch-free payments. These are small, square graphics that look like barcodes.
QR codes (likeShopcodes) bypass the need to have any in-store payment method. Shoppers can use their mobile devices to scan the QR code and make online purchases through a personalized checkout page on your ecommerce site.
Advantages and disadvantages of contactless payments
Like any form of new technology, contactless payments have advantages and disadvantages.
Contactless payments are more secure
Tapping a contactless-enabled credit card onto a payment terminal might sound risky. After all, how do you prevent fraudsters using your card if it falls into the wrong hands?
The good news: unlike the magnetic stripe found on chip-and-PIN cards, fraudsters can’t clone your data onto another card.
一个非接触式此外的技术流程t is found within the microchip. Only terminals registered to an official business can take contactless payments using the microchip.
Moreover, outdated magstripe cards store your financial data right on the magnetic stripe—meaning that if someone swiped your card, it'd be pretty easy for them to lift and clone your data. On the other hand, the data stored on microchips is always changing, making those cards more secure.
Some banks also prevent fraudulent transactions by asking cardholders to enter their PIN every so often. It’s their way of checking nobody has stolen a contactless card—and that the person making the transaction owns the card they’re using to pay.
Plus, while there is no limit in the US, some financial institutions limit how much money can be sent through a single contactless transaction. In the UK, for example, the limit is£100per transaction. Canada allows contactless payments of up to$250in one go (increased from $100 pre-pandemic).
Consumers turned to contactless during COVID-19
When the COVID-19 pandemic spread globally, the World Health Organization made thisannouncement: “When possible it would also be advisable to use contactless payments to reduce the risk of transmission.”
This announcement, alongside shoppers’ fear of contracting the virus from touching payment terminals, caused the volume of contactless card transactions to skyrocket.
Some30% of shoppersmade mobile wallet transactions for the first time during the first two months of the pandemic.
Contactless payments accounted for88.6% of total card paymentsin the UK throughout 2020—an increase of 7% compared to the previous year. Certain industries became evermore reliant on contactless payments. Grocery stores, for example, saw a 29% increase.
The same trend happened elsewhere around the world. In the US, more than half (51%) of consumers admit to using cash less frequently—or not at all—since the start of the COVID-19 pandemic. Another31% of device users显示感兴趣的非接触式支付选项。
Faster (and easier) checkout process
It’s crucial for retailers to play close attention to the checkout experiences they’re giving to customers. Almosthalf of customerswho can’t use their preferred payment method will abandon a purchase entirely.
That boils down to the fact51% of consumersare influenced by a quick and easy checkout process. Contactless fits neatly into those expectations and demands. Some62% of buyersare more comfortable making in-store purchases with digital or contactless payments because they’re fast and easy. No waiting around to enter your PIN necessary.
In fact, there is a new breed of checkout experience centered around contactless payment technology. The goal? To make these experiences as fast, easy, and enjoyable as possible.
Mashgin uses computer vision to instantly identify and ring up items for sale—which also makes us the fastest self-checkout system in the world—we’re up to four times faster than cashiers when it comes to the speed of transactions.
"What’s cool about computer vision is that Mashgin can quickly ring up every item in a transaction at once—no need for customers to fuss around with bar codes. They just place their items down and, in half a second, they are ready to pay.
“When you combine this with contactless payment options like NFC and mobile wallets, you end up with a completely touchless checkout experience where people don’t need to touch anything but their own purchase and form of payment, which is why we call it the Touchless Checkout System. Since thecheckout linesmove faster, everyone gets in and out of the store in less time, which is important in the world of COVID.”
Toby adds that one retailer, theDenver Broncos, “saw 96% more throughput at concessions stands, which resulted in a 34% increase in total sales” in places where this contactless checkout method was used.
Card transaction fees
Anytype of digital paymentis always competing with cash. There are no transaction fees that absorb into your margins when customers pay with cash.
However, customers are moving away from cash payments. Instead, they’re using credit or debit cards (using either contactless and chip-and-PIN methods)—both of which incur transaction and payment processing fees.
The good news is that most payment processors don’t charge extortionate fees. The average processing fee for credit cards sitsbetween 1.5% and 3%of the total sale. That money usually hits your bank within three days.
Where can you use contactless payment?
The fast growth of contactless payment means most bank card issuers are offering cards with contactless payment technology. Visa, Mastercard, and American Express all offer credit and debit cards that have the microchip needed to make a contactless payment.
More retailers are offering contactless payments to in-store shoppers, too. A recentreportfound that most people use contactless methods for buying essentials in these sectors:
- Grocery (85%)
- Pharmacy (39%)
- Retail (38%)
- Quick service restaurants and fast food (36%)
It’s not just brick-and-mortar stores where contactless is used, either.Over one million customersused Transport for London’s contactless payment card to pay their bus fare. Around 69,000 contactless payments are made each day on London buses.
How do I accept contactless payments?
毫无疑问,提供非接触式支付is an option that more and more shoppers are looking for. With COVID-19 hiking up the number of transactions that are made contact-free, retailers can win overfootfallreturning to brick-and-mortar stores.
One way to offer and accept contactless payments is withShopify POS Go. With it, you can accept all contactless credit, debit or mobile wallet payments anywhere in your store without needing a separate card reader.
Remember: these days, shoppers value afast and easy checkout processregardless of where they’re shopping. Have a contactless payment system ready to welcome them.
Start taking contactless payments instantly
Every Shopify plan includes built-in payments processing with quick payouts and low rates, starting from 2.4% + 0c USD. Skip lengthy third-party activations, accept all popular payment methods (including contactless!), and start taking payments online and in-person faster.
Contactless payments FAQ
How does contactless payments work?
What is contactless payment example?
How do you do contactless payment?
What are the types of contactless payments?
- Credit/Debit Card Payments: Payments made with a contactless debit or credit card are one of the most popular forms of contactless payment. The card must be held near a payment terminal with a contactless reader.
- 2Mobile Payments: Mobile payments are becoming more popular as phones become more sophisticated. These payments are made using a mobile wallet app, such as Apple Pay or Android Pay.
- Wearable Payments: Wearable payments are becoming increasingly popular. Smartwatches, fitness trackers, and other wearable devices can be used to make payments.
- NFC Tags: These are tags that contain an NFC chip which can be read by an NFC reader. The tags can be used to make payments by tapping the tag against an NFC reader.
- Near-Field Communication (NFC): NFC is a form of contactless communication between two electronic devices. It’s used to make payments by tapping a device, such as a smartphone, against an NFC reader.
