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contactless payment technology

Contactless Payments are Here. Are You Ready?

Brant Schelhaas

Contactless payments are rapidly gaining momentum in today's business environment. According to the Smart Card Alliance, the first contactless payments in the U.S. (1) were introduced in 1997, when consumers would use small wands to pay for gas at the pump. Contactless payments have since evolved, and near field communication (NFC) technology that leverages radio-frequency identification has been integrated into credit and debit cards as well as an array of mobile devices.

Today, contactless payments are finally gaining momentum, and data from Deloitte serves as a strong reminder of this evolving business reality. Deloitte predicts that by the end of 2015, five percent of the base of 600-650 million NFC equipped smartphones (2) will be used at least once a month for contactless payments, which is a 14 percent increase from what was seen in the middle of 2014.

As more consumers worldwide begin to leverage contactless payments when making transactions, business owners need to be prepared to adapt their own technology and stay ahead of the game.

Benefits for consumers
Contactless payments offer many consumer benefits which have largely driven their increased adoption. The two main benefits to consumers are convenience and security. Let's take a look.

  • With contactless payments, consumers don't need to dig through a purse or wallet to find their cash or cards, especially since NFC technology is being so commonly utilized through mobile devices. Smartphones are easily accessible and wands or tags can be attached to shoppers' keychains to make transactions easier.
  • Contactless payments offer increased security because the technology uses encryption to help securely transmit data. This is especially important to business owners, as new standards in PCI compliance and EMV chip integration are placing a heavier burden on merchants to prevent fraud. Additionally, contactless payments provide added security in the following ways:
    • The customer never has to hand over a physical card to the cashier.
    • It's less likely a consumer will leave their card behind.
    • Many contactless payment methods offer advanced identification technology, such as fingerprint readers.
    • Payment networks that process contactless payments have the ability to detect attempts to use the same transaction information more than once.
    • Contactless payments do not require the cardholder's name to be passed between the card and the terminal.
    • Many contactless payments do not use the customer's actual account number when processing a payment.

Business owners win, too
As contactless payments continue to gain popularity, businesses that accept this technology will have a competitive advantage over other merchants. In fact, both Google Wallet and MasterCard PayPass offer users the ability to locate stores that will accept their technology. In addition to standing out in the marketplace, there are a few additional benefits to accepting contactless payments, such as:

  • Contactless payments process faster than traditional payment methods, which equates to shorter lines and better customer service. Similar to the security benefits to consumers, contactless payments make business owners less vulnerable since contactless payments do not transmit consumers' card information to the POS system.
  • Since contactless payments can be used quickly and easily, they have the potential to increase unplanned purchases and sales overall. In fact, a study released by MasterCard showed consumers may spend up to 30 percent more with contactless payment methods (3) than with traditional credit cards.

How businesses can prepare
Considering the benefits contactless payments have for both consumers and merchants, business owners should be prepared to begin adopting this technology. This is especially true in light of the upcoming EMV liability shift. Effective October 1, 2015, merchants who have not made the investment in chip-enabled acceptance payment technology may be held financially liable for in-store fraud that could have been prevented with the use of an EMV acceptance device. Many EMV-enabled payment terminals are already equipped with NFC technology. 

There are several important steps you can take to prepare to start accepting contactless payments:

  • Review your average sales and traffic to determine if contactless payments are right for you.
  • Consider ways to make contactless payments in your business as simple to use as possible.
  • Find out if your payment terminal already accepts contactless payments.
  • Make sure the payment terminal you use supports the latest NFC specifications.
  • Use in-store advertising to promote contactless payments in your business.
  • Train your employees to use contactless payment processors.
  • Partner with an experienced payments provider who is up to date on the latest technology that will provide your business the best ROI.

Contactless payments are likely to stick around, especially as the Internet of Things brings the convenience of using technology even more to the forefront of modern life. Business owners should investigate the benefits of contactless payment technology and begin taking steps to integrate the technology into their operations.

  1. http://www.smartcardalliance.org/resources/pdf/Payments_Landscape_WP-111413.pdf
  2. http://www2.deloitte.com/no/no/pages/technology-media-and-telecommunications/articles/tmt-pred-contactless-mobile-payments.html
  3. http://newsroom.mastercard.com/press-releases/new-mastercard-advisors-study-on-contactless-payments-shows-almost-30-lift-in-total-spend-within-first-year-of-adoption/

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