With contactless payments, customers have the option to pay for goods and services without direct physical contact with cashiers or point-of-sale (POS) terminals during in-store transactions, in most cases. Also known as “tap and go,” this payment technology is especially common in the retail and hospitality industries.
Yet, because both sides of every transaction benefit from contactless payments, it is likely that this could become the standard payment option for in-person shopping well into the future. What exactly are contactless payments? How do they work? And why should business owners keep this trend top of mind? Continue reading to learn more.
Contactless Payments Explained
Technically, all card-not-present (CNP) transactions could be considered contactless, whether customers pay for items online, in an app, over the phone or via mail. However, the term came into modern usage with the rise of Near Field Communication (NFC), a short-wave technology that allows payment devices to connect wirelessly. NFC is similar to Bluetooth, with the main difference being that Near Field Communication works across very short distances.
Credit and debit cards were some of the first payment devices to feature contactless payment capabilities. However, the technology is now standard among mobile wallets stored on smartphones, tablets and wearable devices, such as smart watches and fitness trackers. When paying for items in person, customers can simply wave their payment device across a POS card reader to authorize the transaction. Once the payment is approved, both sides receive electronic confirmation, with no signatures or personal identification numbers (PINs) required most times.
The contactless trend has also expanded to merchandise pickup and food-delivery services. Regardless of the original payment method, customers can authenticate their identities at the door or curb via wireless verification technologies, inluding scannable QR codes.
What Are the Advantages of Contactless Payments?
Below are the three primary drivers behind the growing popularity of “tap and go” technologies.
Payment Security
Because customers never hand over their credit cards or smart devices during checkout, contactless payments add a layer of security to the in-person shopping experience. When using smart devices, customers benefit from even more fraud protection since they must have already uploaded their credit card details into their devices (where the information is normally encrypted). They must unlock their smartphones and wearables via pattern, PIN, fingerprint or facial recognition, and they must open their mobile wallets, which may or may not involve additional authentication steps, depending on the app being used.
Transaction Speed
By eliminating the need for signatures and PINs at the checkout counter, contactless payments are up to 10 times faster than traditional payment methods. This means shorter lines for customers and more sales per hour for businesses.
Personal Safety
Contactless payments were already on the rise before the pandemic, with more than half of American consumers relying on this technology in some way. Now, contactless payments help to minimize physical contact when people shop in person, by mitigating transmission concerns amid a global pandemic.
Although there is considerable debate over how easily COVID-19 spreads via touch, businesses that reduce the need for direct contact can ease safety concerns for customers and employees alike. In this infographic, you can see this preference in the numbers, with contactless payments being used most often at grocery stores, pharmacies and other essential businesses that were allowed to stay open during COVID-related lockdowns.
The pandemic will eventually subside, and there will certainly be new payment technologies that emerge in the future, but the underlying shift to contactless payments is unlikely to reverse any time soon. In fact, an estimated 85 percent of mobile wallet users expect to continue making contactless payments two years from now. For further information on this growing demand, be sure to read the resources linked above.
Mihir Korke is the head of acquisition at Clover Network, a provider of small business credit card processing and point-of-sale systems. Clover specializes in restaurant, retail, and personal and professional service payment solutions. With desktop and mobile POS systems, contactless payments, and solutions for curbside pickup and online ordering, loyalty and rewards, Clover offers multiple solutions to meet businesses’ needs.