July 28, 2021

Contactless Payments: Definitions and 5 Benefits for Business Owners

Samantha Hubay
Written by:

Samantha Hubay

Contactless Payments: Definitions and 5 Benefits for Business Owners

Could the checkout process at your store, restaurant, or office use some fine-tuning? If your staff is exasperated with a complicated interface or customers get frustrated that the process takes too long, the answer is yes!

Luckily, you’ve come to the right place. In this post, we’re going to welcome you into the world of contactless payments. We’ll explore what they are, how they work, and five of the benefits they can provide to businesses like yours. Who knows? You may have just stumbled upon the solution you’ve been searching for. Let’s get started!

 

 

What Are Contactless Payments?

A contactless payment is an electronic payment that does not require physical contact between a cardholder and credit card terminal. Instead, the cardholder holds their contactless card or mobile device near the terminal and their payment information is transmitted through Near Field Communication (NFC) technology. Another form of contactless technology you may have noticed at a favorite restaurant recently is the Quick Response (QR) Code. These have become popular alternatives for physical menus; we’ll explain more in the next section.

 

A Brief History of Contactless Payment Methods

Contactless cards were first introduced in the United States in the early 2000s. The mobile wallet applications Google Wallet™ and Android Pay™ launched in 2011, and Apple Pay® was announced shortly after in 2014. In 2015, the United States began transitioning to EMV chip cards for added cardholder security. This prompted thousands of business owners to make the switch to more modern credit card terminals, many of which accepted EMV chip cards and contactless payments.

As you can see, contactless payment methods aren’t necessarily new, but they have certainly gained popularity since the 2020 pandemic. In fact, the overall usage of contactless payments rose 150% between March 2019 and June 2020, according to Forbes Advisor. Cashiers and customers alike appreciate the ability to complete a transaction without needing to physically touch the credit card terminal or pass a card back and forth.

Contactless payments are a great example of how technology can help businesses offer a positive customer experience, even in the most challenging times.

 

 

How Do Contactless Payments Work?

As we mentioned before, contactless payments are transmitted using Near Field Communication (NFC) technology.

 

NFC Technology

NFC transactions require two devices, each enabled with an NFC chip. The first device needed is the payment acceptance equipment, an NFC-enabled credit card terminal. The other necessary device is the cardholder’s payment method, either a contactless card or mobile wallet.

Most major credit card brands have released new cards that contain an NFC chip so cardholders can choose to “tap” their card rather than swipe or insert it into the card reader. Newer smartphones are also equipped with two-way NFC communication to enable mobile wallet payments through Google Pay or Apple Pay.

The chips (also known as “tags”) don’t contain any power on their own, but they do have a small amount of magnetic polarity. This polarity gives the chips, when within very close range of each other, enough power to transfer data. When the data is transferred, a one-time, encrypted code is created unique to that transaction. This helps protect the cardholder’s payment information. The whole process is similar to securely connecting a Bluetooth device, except it requires less power and the data transfer is completed a bit faster.

 

QR Codes

Quick Response (QR) Codes also offer speed and convenience for smartphone users. A QR Code is a type of 2-D or Matrix Barcode that can convey a wide variety of information. Unlike standard Barcodes, QR Codes can hold information both horizontally and vertically. This gives them a higher capacity for transferring information, which has helped them steadily gain popularity in many sectors including restaurants, retail, healthcare, gyms, and more.

Most modern QR Codes are scanned using a smartphone. Newer models allow QR scanning via the camera, but if your phone doesn’t have this feature there are plenty of free apps you can download that will allow you to scan these codes. Possibly the best part about QR Codes is that you can create one in seconds! Simply visit qr-code-generator.com, enter the information you want to share, and download your code. You can then take the image of your code and print it out for your customer to quickly scan. Many restaurants have adopted this option to reduce the contact required for physical menus.

 

 

Five Benefits of Contactless Payments for Business Owners

Now that you have a good idea of what contactless payments are and how they work, let’s explore the benefits they can offer your business.

 

1. Increased security.

A contactless payment creates a one-time encrypted code unique to that transaction. This keeps cardholder data secure and reduces liability risks for your business.

 

2. Speedy check out.

Contactless payments are quick! They typically only require one action from the customer, such as tapping their card or opening a mobile wallet on their phone. The technology handles the rest in a matter of seconds.

 

3. Reduced risk of spreading illness.

Today’s consumers have a new awareness of high-touch surfaces. By accepting contactless payments, you can help your customers and staff gain peace of mind and limit the number of surfaces they must touch to complete their transaction.

 

4. Enhanced customer convenience.

Some customers might feel like they have one too many things to carry in your store. Trying to juggle a purse or wallet, keys, phone, shopping list, cart, and more can start to feel a little overwhelming halfway through a shopping trip. You can simplify the experience for these customers by accepting contactless payments.

 

5. No added costs.

There are no extra processing fees required with accepting contactless payments. There may be a cost associated with upgrading to an NFC-enabled terminal, depending on your processor and the capabilities of your current setup. However, once you start accepting contactless payments you will only have to pay your typical processing fees.

 

Are you ready to start accepting contactless payments? We can help!

 

Get Started Today with Electronic Merchant Systems

Electronic Merchant Systems is a leading provider of payment processing and merchant services. We offer a full suite of payment solutions designed to help business owners boost profits and streamline operations. And yes, NFC-enabled equipment is one of the options we offer! To learn more about how we can help you start accepting contactless payments, contact us today.

Two men at cash register at cafe - Have questions? Our payment experts are here to help.

Check out these posts for more payment processing tips and resources:

What is PCI Compliance and Why is it Important?

Everything You Need to Know About Merchant Accounts & How to Get One

What Are Merchant Services and What Can They Do for My Business?

 

Sources: Global Payments, Forbes Advisor, Small Business Computing