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Payment solutions

Thanks to technological advances, new consumer habits are emerging. In the payment solutions sector, one payment method has been gaining ground for several years now. This is contactless payment, which is becoming almost a standard in shops and SMEs. But what does contactless payment really mean? And above all, how does this democratizing payment method work ? 

What is contactless payment?

Contactless payment is a much simpler way to make purchases. In concrete terms, it is a payment method that does not require the insertion of a bank card and the entry of a security code to validate a purchase. 

As its name indicates, the payment is contactless. All you have to do is bring your smartphone, bank card or the connected watch that can be used as an intermediary a few centimeters away from an appropriate payment terminal. The terminal automatically connects to the device to validate the transaction in just a few seconds.

Thus, the user of a contactless payment solution is no longer obliged to touch the payment terminal or to remember his PIN code before making a purchase. 

Contactless payment: how does it work?

Are you wondering how this payment method works? 

How contactless payment works 

In reality, contactless payment is based on RFID (radio identification) technology or the NFC protocol. NFC (Near Field Communication) is a technology that integrates a chip that ensures the exchange of information at very short distances. This information is transmitted by radio waves from your bank account, mobile application or contactless card to a terminal that will read and process it. Of course, the transaction is 100% encrypted (the transmitted information is protected and secured).

For the transaction to be successful, the contactless payment device you use (the issuer) must be equipped with NFC technology. Also, the electronic payment terminal used must be compatible with this protocol. 

Contrary to popular belief, it is not necessary to place the transmitter on the terminal for the transaction to take place. It is enough that it is within 10 cm of the payment terminal. 

3 steps to accept a contactless payment

In just three steps that take place in a few seconds, the contactless payment is already completed:

  • The seller or merchant enters the transaction amount on his payment terminal;
  • The buyer positions the compatible payment solution he wants to use near the terminal screen displaying the pictogram dedicated to contactless payment;
  • A light comes on and a beep sounds to indicate that the payment is validated…

Depending on the terminal used, it is possible to generate a receipt that the buyer will keep. To choose the best terminal compatible with NFC technology, consider using a contactless payment terminal comparator.

How does contactless payment work ?

The benefits of contactless payment

In addition to being beneficial for consumers, contactless payment is very advantageous for SMEs and merchants. Indeed, thanks to this payment method :

  • You reduce to only a few seconds (between 10 and 15) the time you spend to register and collect your payments;
  • You limit cashiering errors, especially when you have to give your customers leftovers because cash transactions are down;
  • You reach more potential customers who will come to your store to make their purchases, because almost all bank cards are now equipped with NFC technology;
  • You reduce the risk of theft at your point of sale, because you store less money on site;
  • You stand out from your competitors by offering a payment method that is in vogue and in line with the anti-covid gestures;
  • You are able to better know your customers’ profile thanks to the data you can collect via this payment method…

In view of all these advantages, you understand that you absolutely must integrate a solution compatible with contactless payment into your SME. To find the cheapest terminals that are perfectly adapted to the size of your structure, use a payment solution comparator.

Is contactless payment risk-free?

It is true that contactless payment is based on a very secure protocol. But the fact that it does not require the entry of a code or the confirmation of identity during the purchase process represents one of its biggest weaknesses.

Indeed, if a card, a smartphone or an object used to make this payment method is lost or stolen, it is almost impossible to prevent an ill-intentioned person from buying without your consent. 

Fortunately, contactless payments are only possible for small amounts. These are currently capped at €50. So no one can empty a bank account via contactless payment. Moreover, since it is mainly the banks that encourage this payment method, it is possible to be compensated in case of fraudulent use of the payment solution.

For all transactions over €50, the user is required to provide a PIN code.

The only way to avoid payments without the owner’s consent is to keep the payment device. If the device is lost, it is important to deactivate the contactless payment functionality as soon as possible.

What to remember? Contactless payment is a purchase method optimized by NFC technology. Simple, flexible and quick to implement, this payment method is only possible if both devices used during the transaction are compatible with this technology. As a small business, you need a payment terminal that can process the information provided by this technology.

On the market, there are several payment solutions that integrate the NFC process. Using a payment terminal comparator allows you to objectively choose the device compatible with this technology that you really need within your structure.

Alicia Gomez - Senior Content Manager | Alicia is an author, blogger, and certified Enneagram coach with a bachelor's in Communications. She's been blogging for six years and run a consulting business offering communications, strategy. Her favorite quote: Be you. Break free. Break through.

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