May 2, 2023

Industry Trends

What is a Contactless Payment?

Industry Trends

Contactless payment is the process of tapping or swiping your contactless device, which could be a card or a smartphone, over a reader, which then accepts payment for whatever it is the person is purchasing.  This could be items at a grocery or paying for parking at a local mall. Also known as tap-and-go payments, they essentially allow users to pay a low-value payment quickly, without needing them to fumble with entering their pin.

How exactly does contactless payment work?

Contactless payment cards, such as a debit card, has a chip inside them that emits a radio wave which is then picked up by the antenna inside the contactless reader. This sort of thing is known as radio frequency identification or RFID for short.  So, to pay for something with a contactless card, you would need to take your plastic card out of your bag and hold it up close to the payment terminal or the RFID reader, and then the signal would be picked up.  Then, they communicate with each other to process the payment. On occasion, the payment may not go through, for whatever reason. But since it isn't too big of a deal, since this type of contactless payment is more about convenience than anything, the user can just enter their pin instead as they usually would.

How do I accept contactless payments?

If you wanted to accept contactless payments for your business, to make things much easier for your customers, you will need to have the correct terminal to be able to do this. Right now, the terminal you may have may already have a contactless system with it.  You should look out for the contactless symbol on the terminal itself which will let you know if it's currently present. If this is not the case, you should contact your PoS provider and ask for an updated terminal that accepts contactless payments.

What devices can utilize contactless payment?

Commonly, credit and debit cards are the main two which people use when they want to make a contactless payment, though more and more people use their digital watches, wristbands, and even key fobs to make payments.

How long do contactless payments take to process and clear?

As of now, the industry standard is about a day of trade plus 3 days for the payment to fully be processed and cleared by the bank. Although this is getting much faster in the industry and soon the standard may be the same day for this to be completed. Although this varies from bank to bank, it can take anywhere from 2-4 days for a contactless payment to show up on a customer bank statement.  In some cases, they show up as a pending payment on the statement before it has fully been cleared. Contactless payments are almost always signed on a customer's bank statement with a contactless symbol next to it.

Is there a daily limit for contactless payment?

Although it depends on which part of the world you live in, generally there is no limit on the number of times you can use your contactless card, though if payments do seem unusual then the bank could flag them as suspicious and may instead ask for your pin for your next purchase.  As mentioned, there is a restriction per transaction, though this is being increased year on year for many countries around the globe as more and more people familiarize themselves with the technology and this also helps to encourage people to use it over regular cash payments.

Where can contact payments be used?

We know that contactless payments can be made with a lot of different digital devices, but where can you take advantage of contactless payments throughout your day-to-day life?  As things progress, more and more large franchises such as supermarkets and restaurants are becoming more accepting of contactless payments. And as things in the industry get more affordable, even smaller businesses are embracing this change and are steering away from traditional payment methods to even go exclusive down the contactless route.  So in essence, pretty much anywhere where you can buy something, you will most likely be able to pay with your contactless device.  

Pros and Cons of contactless payment

The Pros

  • Customers want contactless - the fact is, customers, want contactless. They want as little contact as possible, and with these systems' increased use by over 300% year on year, it's obvious everybody is wanting to embrace these contactless systems. So the bottom line is, they're just good for business.
  • Cost reduction - Common concern is that contactless could cost a business more money to get the system implemented, but in reality contactless could actually reduce costs for your business and even encourage customers to spend more.
  • Business risk reduction - with more and more contactless payments coming through your business, it means that there is less cash on hand to be stolen by thieves.
  • Increased customer experience - Everybody hates waiting in a queue as someone stumbles around scrambling for change. Scenarios like this are completely gone with contactless payment, which is going to create a better experience for all your customers.

 The Cons

  • Fraud and security - some customers who are new to this sort of thing just do not trust this type of payment method, regardless of the data that shows how safe it is. So ultimately, this sort of thing could turn customers away, that's why it's important to still accept cash payments for now till people get more comfortable with this type of technology.
  • Transaction limit - Currently, a customer can spend no more than $40 with their contactless device, which means if they're wanting to pay for their weekly food shop, this is not going to be an option for them.