• Mihir Korke, Head of Acquisition at Clover Network


• 18.08.2021 11:15 am
#contactless #payments

The financial industry is always looking for ways to make transactions easier, faster, and more secure. For in-person shopping, at least, few technologies help achieve these goals better than contactless payments. 

This article explains what contactless payments are; how they work; and why customers and merchants alike increasingly prefer to use this technology when conducting business face to face.

What are contactless payments and how do they work?

Although eCommerce and in-app purchases technically qualify as “contactless,” the term more broadly applies to in-person transactions that rely on near field communication (NFC) to create a wireless link between a customer’s payment method and a seller’s point of sale (POS) device. Both sides of the transaction must use NFC-enabled technology in order for contactless payments to work.

Most consumer credit and debit cards issued in the U.S. now ship with NFC capabilities, which allow customers to simply tap or wave their cards across a POS card reader – sometimes without entering any PINs or signing receipts. However, a growing number of consumers now use mobile wallets on their smartphones or wearable devices – both of which involve uploading one’s credit card details in advance to an app. This payment method helps add a layer of security, since users must physically unlock their devices, launch their mobile wallets, and complete either a biometric or two-factor authentication (2FA) step before initiating a transaction.

Most modern POS readers also come standard with NFC technology, allowing merchants to accept contactless payments regardless of whether buyers use cards or smart devices. It’s also possible for merchants to convert existing smartphones and tablets into NFC-ready terminals with mobile POS card readers.

This is how contactless payments work. What is driving their growing popularity?

The advantages of contactless payments

There are several reasons why the use of contactless payments is growing in the financial and retail worlds. In addition to their enhanced security, contactless payments allow for:

• Faster transactions — Contactless payments happen up to 10 times quicker than transactions that rely on cash, checks, or magstripe cards. 1 This speed can mean shorter lines for customers and more sales per hour for businesses.

• Greater convenience – Many consumers don’t even bother carrying physical wallets, given how easy it is to upload credit cards into the digital wallets stored on their mobile phones. By some estimates, 85% of mobile wallet users are happy with the technology and plan on using it well into the future.2

These benefits existed before 2020. The COVID-19 pandemic has led to a new advantage that could help make contactless payments the standard for most in-person transactions moving forward.

The advantages of contactless payments in a post-COVID world

The pandemic has forever altered the business landscape, sometimes making it harder for consumers and merchants to conduct business in-person due to social distancing rules and concerns about disease transmission. 

However, contactless payments help remove the need to physically touch communal assets such as POS readers, keypads, and signature pens. This benefit also extends to other aspects of the shopping experience – including curbside pickup and delivery. Customers can use scannable QR codes to confirm their identity when receiving items that were ordered online or over the phone, for instance.

2020 was a difficult year for commerce. Many brick-and-mortar businesses struggled just to stay open. Contactless payments helped to make these businesses more resilient, thanks to the technology’s ability to help promote health and safety (not to mention speed, security, and convenience).

To better understand why the shift to contactless payments is happening and what steps merchants, vendors, and financial professionals can take to help improve the shopping experience even more, check out the accompanying resource.