Contactless Payments

Contactless payments are a fast, simple way for consumers to pay for products and services. Using a Point of Sale (POS) terminal, merchants offer technology in which buyers can pay without actually making contact with the terminal. That means no PIN entry card swiping or inserting into the processing terminal. Instead, consumers hover their payment (by card or device) an inch or two above a logo on the POS terminal. This logo looks like the WiFi logo, only turned on its side. When the payment is accepted, the logo will light up green, a sound will beep, or a checkmark will appear on the terminal’s payment screen. 

To reiterate, contactless payments, no signature and PIN entry is required at the time of purchase. Once the terminal approves the payment, the transaction is complete. This method of payment is all about simplicity and ease.

There are two ways to make a contactless payment. The first requires a card, typically a debit card issued by a bank, that has the contactless payment logo imprinted. The card should have the visible imbedded chip that most cards have today, regardless of capability to conduct contactless payment. 

But contactless payment cards have a second chip, as well as a Radio Frequency Identification (often called RFID) antenna that enables transmission between the payment terminal and the card. 

Digital wallets found in devices like smartphones also have two chips. The first chip allows access to the consumer’s account using encrypted card information. Then, a second chip contains near-field communications that releases the card’s payment data to the merchant’s terminal, all without any physical contact. 

Most devices have their own digital wallets, although some platforms, like Google (with Google Wallet and Google Pay), transcend the mobile device and stores payments that are computer accessible. Examples of popular digital wallets include Apple Pay, Android Pay, and Samsung Pay. 

Some digital wallets come in different forms, like transit cards (in some cities) that house a balance and deduct from a pre-paid account. Many transit cards offer contactless payment, letting the user hover a card or app connected to the account upon entering a train or bus or other form of public transportation. This is evident everywhere from Sao Paulo, Mexico City, and Buenos Aires.

Devices that hold digital wallets go beyond smartphones. Tablets, smart watches, and even fitness trackers all hold wallets for quick and easy payment options. 

This technology is mostly used for in person purchases. For the most part, retailers and consumers use contactless payments at the location. Not all consumers will have the appropriate card or a digital wallet, however. Contactless payments tend to be favored and used among the digitally inclined consumer. The trend is increasing and people around the globe favor contactless payments for their purchases. 

Contactless payment can also work for B2B businesses, for example when merchants purchase goods at whole sale. When this exchange happens face-to-face, contactless payments may occur in the same fashion that a consumer buys goods at a retail location. 

While some consumers may fear thieves hovering over a shoulder to memorize the numbers of the exposed card, the likelihood of this is minimal given the quantity of numbers and their physical size. Secure transmission occurs to minimize access to numbers in the digital transmission. Using the encrypted chips, information is passed through in the form of codes, rather than account numbers. 

MasterCard is issuing a MasterPass that creates a “token” when the card is added to the digital wallet. The token is a translation of the account information, which adds protection. The token matches an account at the time of payment. This is an example of how a digital wallet could be safer than using a contactless payment card. 

The safest form of payment still uses a PIN and signature method, which requires contact, however, contactless payments are not considered unsafe and do not have high fraud rates. 

Contactless payments are appealing for a number of reasons. The first is the ease. When a consumer needs to pay, they only need to hover their card or device. The elimination of steps makes this a more convenient way to pay without trying to decipher the needs of each individual payment terminal. 

It’s also faster. The elimination of payment steps means the consumer does less, creating an efficient, quick experience. Not only that, the people waiting in line shorten their time in the queue. Both of these advantages make for a better customer experience, which is beneficial for merchants in the long term. 

Finally, contactless payments are modern. People who like to be on the cutting edge of technology will respect businesses that offer fast, easy payment options by keeping on top of the latest trends. It sends a positive message about the merchant, and the tech-savvy consumer feels satisfied. 

Contactless payments are offered all over the world. In countries where technology is booming, this is a very popular method of payment. For example, in Latin America e-payments are low compared to the rest of the world, however that makes it a fertile ground for opportunity when it comes to contactless payments. The rise in e-commerce and start-ups in LatAm make it a prime location to integrate advanced contactless payment systems. Brazil is an outlier, however, where 70% of POS terminals are already equipped for contactless payments, and that number is on the rise. 

The U.S. is also behind, but due to the recent pandemic, MasterCard reports 51% of Americans are now using contactless payment. By contrast, countries like Australia, the United Kingdom, Hong Kong, and Brazil have the highest volumes of contactless payment options. Europe is a leader in contactless payments usage, where 48% of payments are contactless. The rest of the world is nipping at its heels to fully integrate this payment trend.