While contactless smart cards were first used in Seoul, South Korea in 1995, it wasn’t until 2007 that contactless payments came into operation throughout Europe. Since then, this form of making payments has risen year-on-year.
MasterCard recently revealed that 78% of all payments in Europe are now contactless. Indeed, statistics show that mobile contactless transactions doubled in Europe in the first quarter of 2020 alone, in small part due to the Covid-19. The subsequent raising of spending limits in various states has also helped with the shift to contactless payments.
How contactless payments work
Another reason for the popularity of contactless payments is that the process is incredibly simple. The purchaser just waves a card or enabled Smartphone over a reader which accepts the payment.
Of course, there is a lot more happening behind the scenes to make this all happen. The key to this is a chip inside the payment card that emits radio waves. A built-in antenna facilitates the connection with the card reader in a process known as Radio Frequency Identification (RFID) technology. The terminal, recognises the signal, communicates with the card and processes the payment.
With the Internet of Things (IoT), contactless payments can be made via a number of devices such as fitness trackers, key fobs, Smartwatches and even specially designed adhesive stickers. The range of devices that can be used for contactless payments is continuing to increase. Contactless enabled devices can normally be identified by the inclusion of a logo made up of four lines creating a wave symbol. With many of these devices, transactions are normally processed via a digital wallet, such as KoalaPays or Apple Pay.
As well as shops, cafes, bars and vending machines, contactless payment is now commonly used for public transport in many cities across Europe. Significantly, most of the time there is no charge to customers for making a contactless payment transaction.
Secure and convenient
Contactless payments have become the preferred alternative to chip and PIN for a number of reasons, including convenience and security. Obviously, with a contactless payment, most of the time there is no need to input a PIN. However, extra security can be enabled by instructing the terminal to ask for a PIN after a certain number of purchases have been made. Because the card sends the POS (Point Of Sale) reader an individual code, or token, each time a transaction is processed, the account details of the customer are never revealed.
A limit can also be set on the maximum size of each transaction. In Europe, this has been typically set at €30, although many outlets are now allowing higher amounts to avoid physical contact when paying during the Covid-19 pandemic.
Contactless cards aren’t completely without risk. If they are lost or stolen, they can still be used to make transactions until the card is stopped. This underlines the importance of customers getting in touch with the issuer as soon as possible should their card go missing.
Contactless for business
Whether your customers choose to pay by Smartphone or card, the authorisation process is exactly the same for your business. Once the payment is approved by the card issuer, the transaction is finalised. Since contactless payments work within a couple of centimetres from the terminal, it’s virtually impossible to interfere with the transaction. As the card doesn’t leave the customer’s hand, staff intervention is eliminated.
To accept contactless payments, businesses need a type of payment terminal also known as a PDQ (Process Data Quickly) machine. The price of these can vary widely depending on specification, but some retailers choose to rent machines, as it can be more cost-effective.
Cash used to be king, but more businesses are discovering that contactless business reduces the cost and administration associated with cash and also reduces the risk of theft. With most businesses already using contactless payments, it makes sense to offer your customers the choice too.