Cashless and contactless payments are not new. They have long offered benefits for both the merchant and consumer, yet adoption has been slow in the past on the consumer end. Lack of knowledge, concerns about security, or simply avoiding change could have been holding them back.
In recent months, we have seen a radical change in consumer behavior as they attempt to mitigate their risk of contracting coronavirus (COVID-19). They are ready to try new purchasing experiences to limit contact, but both you and the consumer may still have lingering questions:
- How do contactless payments work?
- What adoption rate can you expect?
- Is it secure?
- How will it impact my business and the customer experience?
We have the answers for you here.
How do contactless payments work?
Contactless payments use NFC (near-field communication) to complete transactions without any physical contact between a card or device and the terminal. The devices must be in close proximity to relay an encrypted authentication, which is typically completed in less than half a second.
A customer can enact a contactless payment in the following two formats:
- Mobile wallet such as Apple Pay or Google Pay
- Contactless-enabled credit or debit card (look for this contactless indicator on the card )
The customer simply places one of these forms of payment near the reader, and the transaction is completed in seconds without the need to sign, enter a pin, or pass the card to a cashier. Watch a contactless transaction in action on our Clover hardware below:
All Clover hardware is NFC-enabled and ready to accept contactless payments. Review this guide for detailed information on payment types accepted and how contactless payments work on Clover devices.
What adoption rate can you expect?
While contactless payments have seen slower adoption in the past, coronavirus is certainly accelerating its popularity. A global, Mastercard study of 17,000 consumers illustrates the move towards contactless payments:
- 8 in 10 respondents have started using contactless payments
- 74% of them will continue to use contactless post-pandemic
Health, safety and sanitation are at the forefront of every mind. Touchless. Contactless. Cleanliness. If consumers are able to make their purchases without putting their hands on screens, keypads, styluses or tender, they can make their purchases worry-free.
As consumers see the benefits of using NFC for payments, these actions will become habits and soon turn into expectations as they demand safety considerations for all transactions. Customers will feel safe returning to businesses prioritizing their health and safety and will stop frequenting those who do not.
Are contactless payments secure?
Yes. It’s actually more secure. NFC meets and surpasses all existing PCI compliance standards for EMV payment types. The security of each transaction is ensured through multiple factors:
1. Tokens are used in place of the credit card number
To use a mobile wallet, you need to create an account in Apple Pay, Google Pay, Samsung Pay, or another wallet app. During the setup process, you type in your credit card information. While it sounds like the card number would be stored in the phone itself, the card information is replaced with a unique number to act in place of the actual credit card number during contactless payments. In addition, mobile wallets assign one-time, unique transaction numbers instead of transferring the card number itself during an online purchase. These secure element chips protect your credit card number from hackers, employees and onlookers.
2. User identification is required before the purchase
Before a transaction can take place, the customer must verify their identity via face ID, fingerprint or PIN authentication to access the mobile wallet app. Unlocking the phone takes the place of traditional identity verification steps such as reviewing a driver’s license or typing a PIN into a console.
3. Close proximity is needed to enable the transaction
Once the mobile wallet has been unlocked, a payment cannot be made until the mobile device is close to the point-of-sale terminal. Terminals typically allow a maximum distance of two inches to send or receive signals due to the very specific RFID frequency transmitted (13.56MHz).
4. Theft from lost or forgotten cards is eliminated
Cash and credit cards are kept safe in the customer’s wallet as physical tender is not required in a contactless payment. If cash is lost, it’s often not retrievable. Credit cards risk the number being stolen by whoever finds the card, followed by a hold on the associated account and a replacement card sent in the mail. While your mobile phone could be lost or stolen, the device would still need to be unlocked before any payments could be placed.
How will it impact my business and the customer experience?
In addition to NFC being both physically and financially safer, it is also faster and more convenient. Cardholders using EMV payment methods can expect to wait for authentication for anywhere between 2 and 20 seconds.
With NFC, authentication time is cut to half a second.
Outside of the authentication process, consumers using mobile devices are no longer fumbling with their wallets to find the right change or card; everything they need is already in their hand or on their wrist.
Customers can expect shorter wait times at the register per person and generally faster lines for everyone. They can return to their activities more quickly and be apt to return for another purchase later considering the short wait time. Your order takers will be able to process more transactions, selling more food and merchandise for your business.
We’re here to help with any further questions you might have on these or other commerce related topics in these uncertain times, or learn more on your own at our COVID-19 Resource Center.