What is a Contactless Payment and How Does it Work?
These days, people want to pay quickly and easily. No more searching for cash or typing in a PIN. Just a simple tap, and theyโre done. Thatโs why contactless payment is getting so popular.
More than half (51%) of Americans are now using some form of contactless payment, and that numberโs only going up.
So, how does it actually work? How can it fit into your POS system and existing payment processing solutions? Letโs break it down.
What are contactless payments?
So, what exactly are contactless payments?
Itโs a way to pay without swiping. No inserting your card. No PIN. Just a tap, using your card, phone, watch, or another device.
It works with smart technology like RFID (radio frequency identification) and NFC (near-field communication) to process payments quickly and safely.
Customers simply tap their card or device near a POS terminal that supports contactless payments. This method, often called โtap-and-go,โ is now a common feature in modern payment processing solutions, helping businesses speed up service and improve the checkout experience.
To learn more about the technology that contactless payments use, check out our complete guide: What is NFC payment.
A brief history of contactless technology
Contactless payments might feel new. But theyโve been around since the 90s.
At first, hardly anyone used them. Just a few shops. A few banks.
One of the first contactless systems launched in 1995 in Seoul, South Korea. The cityโs transit authority introduced the UPass, which allowed riders to quickly pay for bus trips using contactless technology.
Then in 1997, the US got a taste. Mobil launched Speedpass. A little fob you tapped to pay for fuel. Across the Atlantic, in the UK, things really took off. Londonโs Oyster Card changed the game for commuters and by 2014, even credit and debit cards could tap in on the Tube.
Compared to other countries, the US has been slower to adopt contactless payments. However, the COVID-19 pandemic accelerated adoption everywhere as businesses and consumers looked for safer payment options that avoided physical contact.
Now, it's absolutely essential to offer contactless payment options at your business.
How do contactless payments work?
So, how does contactless payment actually work? Itโs pretty simple.
- Step 1: Customer taps their contactless card, smartphone, or wearable device near a POS terminal that supports contactless payments. Look for the little contactless payment symbol, itโs like a Wi-Fi icon on its side. If you see it, you can tap to pay.
- Step 2: The terminal uses NFC (thatโs near-field communication) to read your payment info securely.
- Step 3: That information zips over to the payment processor. If itโs under the contactless limit, thereโs no PIN, no signature.
- Step 4: Once itโs approved, the paymentโs done. Your receipt, printed or digital, pops out.
Quick tip. If youโre thinking about adding contactless payments, make sure your credit card terminals can handle it.
Many customers now prefer mobile wallets like Google Pay, so knowing how to accept Google Pay on your POS system can help you cater to their needs and keep transactions quick.
Types of contactless payments
Contactless payments come in several forms, giving your customers plenty of easy ways to pay without cash or cards.
Contactless credit & debit cards
These are probably what most people think of first.
Contactless on a credit or debit card lets customers just tap their card on your payment terminal instead of swiping the magnetic stripe or inserting the card.
Mobile wallets: Apple Pay, Google Pay, Samsung Pay
Mobile wallets are apps that keep payment details safe on a phone or tablet.
With Apple Pay, Google Pay, or Samsung Pay, customers donโt even need their physical card.
They just hold their phone (or watch) near the credit card terminal, and thatโs it, paid in seconds.
If you want to know how mobile payments can help your business run better, check out our article on how using mobile payments increases business efficiency.
Wearables: smartwatches, fitness trackers, key fobs
Wearables are devices people wear every day (like smartwatches or fitness trackers) that can also make contactless payments.
Instead of pulling out a phone or card, customers can simply tap their watch, smart ring, or key fob on your terminal. Itโs really handy and growing in popularity, especially with people who like quick, hands-free payments.
Other emerging options: QR code-based solutions
Not all contactless payments use tap technology. Some newer methods use QR codes. Customers scan a code on their phone or at the checkout to pay. This option works well in places where NFC might not be available yet but you still want to offer a quick, touch-free payment method.
To get a clearer picture of all the ways your customers can pay, have a look at our guide on payment methods.
Payment processing services made simple
Take integrated payments at one fixed rate, with no hidden fees - anywhere, any time.
Why are contactless payments secure?
Contactless payments use advanced security features to keep transactions safe for both businesses and customers. Hereโs how they protect everyone involved:
Tokenization and encryption explained
When you tap your card or phone, your actual card details donโt get sent.
Instead, a one-time digital code called a token is created for that payment.
Itโs encrypted, so hackers canโt steal your payment information.
No need for physical swiping or chip insertion (reduces fraud risk)
Since thereโs no swipe or chip insertion, thereโs way less risk of card skimming or cloning.
Consumer protections (bank liability, payment limits)
Banks and other financial institutions back contactless payments with strong consumer protections. If a fraudulent charge happens, many banks take on the liability, not the customer. Plus, there are spending limits on contactless transactions to add an extra layer of security.
These combined security measures make contactless payment one of the safest secure payments options available today.
To learn how to make checkout easier and safer, see our guide on how to streamline payments.
Benefits of contactless payments for businesses and customers
Contactless payments offer real advantages that help both businesses and customers. Hereโs why theyโre becoming a must-have for retail and hospitality:
- Faster checkout speeds: Stores that use contactless payments see checkout times drop by 20โ30%. Some can even finish a payment in under 10 seconds during busy times. This means you can serve more customers faster and keep lines moving.
- Reduced queue times and improved customer experience: Because of the faster checkout speeds mentioned above, lines move quicker and customers spend less time waiting. In fact, 67% of shoppers say theyโre willing to abandon their purchase if the line is too long. Keeping checkout fast helps keep customers happy and less likely to walk away.
- Hygienic (especially post-pandemic): Contactless payments mean less touching of cash, cards, or PIN pads, which helps reduce the spread of germs. Since the pandemic, many customers prefer this safer, cleaner way to pay.
- Lower wear and tear on POS hardware: Because customers just tap or wave their card or device, thereโs less physical use of the payment machines. This means your retail point of sale solution terminals stay in better shape longer, with fewer repairs or replacements needed.
How to accept contactless payments in your business
Hereโs a quick checklist to get started with contactless payments:
- Hardware and software requirements: Use payment terminals or POS systems that support contactless technology and ensure your payment processing solutions can handle tap-to-pay transactions securely.
- Choosing a compatible POS system: Pick a POS system designed to accept contactless payments and other modern methods, so checkouts are fast and secure.
- Setting up digital wallets for acceptance: Enable NFC-compatible payment options like Apple Pay, Google Pay, and Samsung Pay by working with your payment provider.
- Employee training: Train your staff to recognize the contactless symbol, assist customers with tapping their cards or devices, and troubleshoot common issues.
For more tips on payment options and setup, see our guides on payment processing solutions and how to streamline payments.
Conclusion
Thatโs all from us! Weโve gone over how contactless payments work, the different ways your customers can pay, and why theyโre good for your business. You also know what you need to get started and how to keep payments safe. Using contactless payments means faster checkouts and happier customers.
Ready to make checkout faster and easier? Discover how Epos Now payment processing solutions can help your business accept contactless payments smoothly and securely. Check it out today!
FAQs:
- What is the difference between contactless payments and mobile payments?
-
Contactless payments include any tap-to-pay method using a contactless card or device at a POS terminal. Mobile payments are a type of contactless payment made specifically through smartphones or smartwatches using apps like Apple Pay or Google Pay. Both use similar technology, but mobile payments rely on your phone or wearable instead of a physical card.
- How secure are contactless payment methods compared to chip cards?
-
Contactless payments are just as secure as chip card transactions. They use advanced security features like encryption and tokenization, making it hard for fraudsters to steal your card data. Plus, since thereโs no physical swiping or inserting, the risk of card skimming is lower. Your card issuer also provides protections and liability coverage for unauthorized card transactions.
- Are there transaction limits for contactless payments in the US?
-
In the United States, there isn't a universal contactless payment spending limit for credit cards. While a lot of banks and card providers have set limits around $100-$250 in the past, these aren't standardized and can vary. Some financial institutions may have higher limits, and the limits can also be adjusted or increased over time.
- What devices and cards support contactless payments?
-
Contactless payment solutions work with a range of devices, including contactless credit and debit cards, smartphones, smartwatches, fitness trackers, and even some key fobs. Look for the contactless symbol, a series of curved lines, on cards or devices to know they support tap-to-pay.
- How can a small business start accepting contactless payments?
-
To accept contactless payments, small businesses need a POS system or card reader that supports contactless technology. Choosing the right payment processing solutions is key. Youโll also want to set up digital wallet acceptance for Apple Pay, Google Pay, and other mobile payment apps. Finally, train your employees on how to handle tap-to-pay transactions smoothly for customers.