Any transaction in which buyers and sellers can avoid making direct physical contact qualifies as a “contactless payment.”

 

Infographic created by Clover Network

Ecommerce is one of the most obvious examples of this growing trend, since online shoppers pay for items remotely. However, there are other types of transactions that qualify as “contactless” – including those made in-person, via in-app purchases, and through internet-connected devices.

This article explores use cases for contactless payments; why the technology is becoming more popular; and how contactless payments can help improve the shopping experience for buyers and sellers alike.

Contactless payment applications – use cases

Well before the rise of internet technology, customers had been ordering products by mail and phone – both of which allow for remote shopping.

The birth of eCommerce and the Internet of Things (IoT) are merely supercharged versions of this basic concept.

However, there is a relatively new breed of contactless payments designed specifically for in-person shopping. The technology relies on near field communication (NFC) – a short-range radio frequency that works much like Bluetooth, but over much shorter distances.

  • The party accepting a contactless payment needs an NFC-enabled point of sale (POS) device. Fortunately, most modern POS readers now ship with built-in NFC capabilities.
  • The party making a payment must have an NFC-enabled credit or debit card, or a mobile wallet accessible from a smartphone, smartwatch, or other wearable tech.

When it’s time to check out, the customer waves his or her payment device across the merchant’s POS reader to initiate and authorize an in-person transaction. Note that no swiping, dipping, tapping, signing, or PINs are required for the payment to be submitted.

Why is the world shifting to contactless payments?

One of the most obvious benefits of contactless payment technology is its ability to help reduce the risk of virus transmission.

Although buyers and sellers must still interact face-to-face, there’s no need to touch communal assets (e.g., POS readers, keypads, or signature pens). Customers don’t even have to relinquish their cards during checkout.

Even before the pandemic, contactless payments were already on the rise thanks to several factors, including:

1. Payment convenience

A growing number of Americans no longer carry cash, with some ditching their physical wallets altogether. Many consumers are wed to their smartphones.

When those mobile devices are loaded with credit or debit card details, users can shop anywhere they see the contactless logo. An estimated 85% of mobile wallet users plan on using their devices for in-store purchases well into the future.1

2. Payment security

Contactless payments initiated through smart devices are backed by a multi-layer security approach that helps protect both sides of every transaction. This is because for payments to go through, customers must:

  • Upload their credit card details in advance. Then, payment information is often encrypted and tokenized within the mobile wallet
  • Unlock their devices at the checkout counter – using a security code, pattern, or biometric info (i.e., fingerprint or facial recognition scan)
  • Access the mobile wallet app, which may or may not have additional authentication steps
  • Hold the smart device within inches of the payment terminal – and only after the cashier has already rung up the sale

This multistep process helps to combat fraud and create a much safer shopping experience – for customers and merchants.

3. Payment speed

Transaction speed is another important driver. Despite the steps outlined above, contactless payments are up to 10 times faster than those made with traditional cash, check, or legacy plastic.2

Faster transactions means shorter lines, happier customers, and potentially more sales per hour. Cashiers can roam the floor and process transactions outside the checkout counter – provided they have portable POS devices with in-built NFC capabilities.

Mobile POS readers also allow sales reps to sell directly to customers at trade shows, conferences, and other off-site events.

The ‘contactless’ movement extends well beyond payments

Contactless technologies don’t just revolve around payments; there are practical applications that extend well beyond transactions.

If you’re looking for a sneak peek into the future of contactless technology, Amazon offers some compelling examples.

The retailer recently launched a chain of brick-and-mortar grocery and convenience stores that take the “contactless” philosophy to the next level.3

  • When customers walk into these stores, they scan their phones at the door
  • Customers can then load their basket or cart with the items they want
  • When they’re done shopping, customers simply walk out of the store – with the balance automatically deducted from their Amazon accounts

Except for the individual items the customer grabs, there is virtually no touching throughout the shopping experience.

The Amazon Go concept is still in the pilot phase, with only a handful of stores scattered across the U.S. and U.K.3 Though given the speed, ease, security, and convenience that it offers, Amazon’s “contactless shopping” model may serve as a template for other retailers.

For more insights into how contactless payments are helping to reshape the worlds of fintech, retail, and commerce, we invite you to read the accompanying resource.

1 “Contactless Payments Are Set to Continue Growing Post-COVID,” The Ascent, 18 June 2020

2 “Mastercard Study Shows Consumers Globally Make the Move to Contactless Payments for Everyday Purchases, Seeking Touch-Free Payment Experiences,” Mastercard, 29 April 2020

3 “Amazon Go and Amazon Fresh: How the ‘Just walk out’ tech works,” Pocket-lint, 4 March 2021

Author

Mihir Korke is Head of Acquisition at Clover Network, a leader in small business credit card processing and POS systems. Clover specializes in restaurant, retail, and personal and professional service payment solutions. With desktop and mobile POS systems, contactless payments, solutions for curbside pickup and online ordering, loyalty and rewards, Clover has multiple solutions to meet your business’s needs.

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