Contactless Payments: How They Work, How Your Business Can Accept Them

Contactless payments can make your checkout faster and more hygienic.
Feb 7, 2022

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Contactless payments — which are tap-and-go transactions made with mobile wallets and contactless cards — have recently shot up in popularity.

More than half of Americans reported using some form of contactless payment, according to a 2020 Mastercard poll. In 2016, only about 3% of credit cards were equipped with contactless technology, according to a 2018 study from the consulting firm A.T. Kearney; now, most major credit card companies issue cards with tap-and-go capabilities.

The COVID-19 pandemic also increased consumer demand for contactless payments. In early 2020, when scientists were still learning about how the virus was spreading, the World Health Organization recommended using contactless payments to reduce the chance of transmission through handling currency and credit or debit cards.

Though it was later determined that airborne transmission was by far the larger threat, the shift in payment methods had taken hold. More than half of tap-and-go payment users say they plan to stay contactless, according to a 2021 Visa study.

How contactless payments work

Contactless payments work the same way chip cards do at the point-of-sale, by sending a unique one-time token to the payment terminal. The token can only be used to make that purchase, adding a layer of security to the transaction.

In general, chip card readers also use near-field communication, or NFC, which is a subset of radio-frequency identification technology. If you have a card reader for chip cards, you can likely use it to accept contactless payments, too.

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Tap-and-go cards

For contactless payments to work, the payment terminal needs to be NFC-enabled.

If both the card and the reader have contactless technology built in — which is indicated on cards and terminals by an icon with four curved lines, the contactless symbol — the card needs to be held within a few inches of the reader for the transaction to go through. (“Tap” is a bit of a misnomer; the card and reader don’t actually need to touch).

Contactless symbol.

Samsung Pay used magnetic secure transmission, or MST, to allow contactless payments, even on old card readers that couldn't receive other forms of contactless payments. However, Samsung is phasing out MST technology and switching to NFC.

Mobile devices

Mobile devices use the same NFC technology to process payments. Customers can add a credit card to a digital wallet like Apple Pay, Samsung Pay or Google Pay. Then, when they hold their phone near the card reader, it will prompt them to confirm their purchase.

Digital wallets usually require facial recognition or a passcode to complete the transaction, which can take a bit longer than tap-and-go cards.

Why accept contactless payments?

There are a lot of benefits to accepting contactless payments at your business. Here are a few:

Hygiene

Contactless payments have become commonplace over the last two years, in large part due to hygiene concerns. Having a POS system that allows for no-contact ordering and payments helps keep employees and customers socially distant and can reduce the spread of germs.

Security

Since they work with a one-time token, mobile payments and tap-and-go card transactions can be processed without storing sensitive information, like names, card numbers and security codes.

Convenience

Going contactless can make your day-to-day operations much more efficient. For restaurants, using a QR code and online ordering system lets customers order on their own time and send their choices directly to the kitchen, which can help prevent miscommunications.

Contactless payments also process faster than swipe or chip card transactions. And they’re much less likely to malfunction than magstripes, which can take several frustrating swipes to work, and which deteriorate from use over time.

Popularity

For restaurants and retail stores alike, the growing popularity of contactless payments means that customers often expect to pay with their phones or the tap of a card.

As more POS systems shift their hardware and software toward contactless capabilities, along with most U.S. banks issuing tap-and-go cards (some even without a magstripe), contactless payments are becoming standard. Shifting to accept contactless payments helps ensure that your business stays relevant and convenient for your customers.

How to accept contactless payments

Many POS card readers and terminals have built-in NFC technology so customers can tap their cards or smartphones to pay. These card readers and terminals enable you to accept in-person tap-and-pay cards, digital wallet payments and more. Some examples:

Square Contactless and Chip reader

Square Reader for contactless and chip

Square
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on Square's website

Price: $49 for reader and $29 for optional dock.

Square’s contactless and chip card reader accepts chip- and NFC-enabled credit cards, but it does not process magstripe payments. The reader can also take digital wallet and smartphone app payments, including Apple Pay, Google Pay and Samsung Pay, and it connects to the Square mobile app via Bluetooth.

Clover Go

Clover

Clover
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on Clover's website

Price: $99 for reader. 

Clover’s card reader processes every type of credit card payment: magstripe cards, chip cards and contactless payments. It also connects to Clover's mobile app via Bluetooth, and can sync with other Clover devices.

PayPal Zettle

Price: $79 for reader; new customers can get their first one for $29.

PayPal’s Zettle accepts chip and contactless payments, but it doesn’t read magstripes. It does, however, let customers pay with QR codes on PayPal and Venmo platforms, and has a PIN pad for debit card transactions.

Other ways to make payments contactless

While contactless payments generally refer to tap-and-go transactions, there are many more ways to make in-person payments touch-free. Here are some others:

QR codes and online ordering

Some restaurants have implemented QR codes into their order and payment process. Having a scannable code at each table can make the dining experience much more efficient, connecting customers to a digital menu or a complete mobile ordering and payment platform.

This method significantly reduces the amount of contact between employees and customers — as well as potential misunderstandings.

Peer-to-peer payment apps

Peer-to-peer payment apps like Venmo and PayPal are built for contactless payments. If your business uses one of these services, customers can find your account with your username or by scanning a QR code.