What Are Contactless Payments and Are They Right for Your Business? Part One
Contactless payment has become a hot topic in the wake of the global pandemic. Across the United States and around the globe, merchants who have previously relied on cash-heavy sales and traditional card payments are now faced with the pressing need to upgrade their systems and bring their transaction processing into the 21st century. But many of those merchants don’t yet fully understand the contactless payment ecosystem, or the benefits that going contactless can offer to their businesses. In this article, we’ll shed some light on those topics by looking at the basics of contactless payments, the benefits they offer to merchants and consumers, the current trends in the industry, and the major factors merchants like you should consider when making the decision to switch.
Contactless Payments 101
Contactless payments are in-person payments that don’t require the customer to make any contact with a merchant’s hardware in any way. Contactless payments specifically refer to payments that require close proximity between the payment method and the payment terminal using radio-frequency identification (RFID) or near-field communication (NFC). That covers everything from tap-enabled credit and debit cards to digital wallets like Apple Pay and Google Pay.
These devices use integrated circuits to emit weak radio waves which can communicate with payment terminals, but only when they’re in very close proximity. NFC, for instance, requires a distance of just over an inch or less. When a digital-wallet-enabled mobile device or smart payment card is held within the necessary distance of a payment terminal, the encrypted payment information is transmitted, and the terminal authorizes the payment without the need for any further input. That represents an enormous convenience, but also a potential security risk, as contactless payments don’t require a PIN or signature. As a result, many banks put limits on the amount that can be transferred in a single contactless payment.
EMV – the standard that covers chip cards – is the most commonly-used contactless payment method and by far the most widely accepted. It’s also becoming more common for large merchants to offer their own unique contactless payment options specifically for in-store purchases, like the Costco Pay Fob. Proprietary contactless payment cards have also become extremely popular for public transportation payments in major urban centers around the world.
Unparalleled Payment Convenience
The primary benefit that has traditionally driven the adoption of contactless payments is convenience. Much like credit and debit cards made in-person purchases simpler and easier than carrying cash, contactless payments take the convenience those cards offer to the next level by eliminating the need to sign, swipe, insert, or enter a pin.
Inserting a chip card and entering a four or five-digit pin only takes a few extra seconds and might seem like a minimal inconvenience, but in a world where speed and immediacy are valued so highly by consumers, even a few seconds count. Those seconds also count for merchants, especially in high-volume sales environments where long lines at checkout create a sales bottleneck and might even turn off shoppers from making a purchase altogether.
Part two of this article covers current trends in contactless payments, and the factors to weigh when deciding if it’s right for your business. Click here to read it now. You can also reach out to a member of the BAMS team for answers to all your merchant questions.
