The Ultimate Guide to Contactless Payments: What Every Merchant Needs to Know

The Ultimate Guide to Contactless Payments: What Every Merchant Needs to Know

As the COVID-19 pandemic continues to transform brick-and-mortar and ecommerce, many businesses’ websites and advertisements now mention “contactless transactions” that don’t require any store employee-customer interaction. In many cases, that means the customer pays for their meal or merchandise online, and swings by the business for a curbside pickup.

However, contactless payments also refer to an alternative in-person payment method that enables a customer to pay for their purchase without handing their card to a cashier or inserting it into a payment terminal. 

Contactless payments are gorwing in popularity and we’re willing to bet that they’re here to stay. 

Contactless Payments: A Red-Hot Trend

Consumers’ use of contactless payments continues to rise worldwide. Canada and Europe were early adopters, although most major credit card issuers have recently ramped up their efforts to introduce contactless payment technology to the United States.

Currently, just a tiny percentage of United States credit card transactions utilize contactless payments. However, most transactions are processed on payment terminals with Near-Field Communications (NFC) capability. That means the terminals are set up to accept contactless payments.

Unsurprisingly, recent pandemic-era regulations have spurred consumers to increase their contactless payment usage. Raconteur, a leading provider of multimedia content for business leaders, notes that 27 percent of United States small businesses have reported a recent rise in contactless (or tap-to-pay) purchase transactions.

How Contactless Payments Work

So, what are contactless payments? Contactless payments involve Near-Field Communications (NFC) technology that relies on communications between two close-proximity devices on the same radio frequency. A typical contactless payment transaction involves an NFC-enabled credit card and a POS system payment terminal set up to accept that card.

When a customer passes their credit card or mobile device within about 1.5 inches of the terminal, bank account information is exchanged, and the transaction is completed. Most recently issued card terminals accept NFC-enabled cards in addition to other forms of payment. If you have an older payment terminal, you can add NFC contactless payments through use of an attachable card reader.

Besides using NFC-enabled credit cards, customers can make purchases with mobile wallets on their smartphones. Smartwatches and key fobs are less-common contactless payment methods.

Contactless payment transactions do not have inherent spending limit restrictions. Beyond a certain amount, however, customers must provide a signature to complete the purchase.

Finally, note that processing a contactless transaction doesn’t cost any more than executing a traditional credit or debit purchase. Your existing payment structure determines the cost of processing the transaction.

Recognized Benefits for Both Parties

The introduction of contactless payments, including Mastercard and Visa contactless payments, brings benefits for customers and retailers alike. Customers will appreciate the faster transaction times, as they’ll be able to exit the store more quickly.

From the retailer’s standpoint, lines will become shorter and customers will be less likely to abandon the sale and walk out. This is especially critical for high-volume businesses that depend on fast service. Examples include convenience stores and shops associated with tourist attractions.

Are Contactless Payments Secure?


The short answer is yes.

Contactless payments are much more secure than easily cloned magnetic stripe cards that feature outdated technology. Identity thieves can swiftly read a magnetic stripe card’s data, and clone a credit card that pirates that data for illegal use. 

Thus, the identity thief can rack up fraudulent charges on the original cardholder’s card. This unfortunate scenario can create a complex mess that can take months (or longer) to unravel.

In contrast, a contactless payment is authenticated, drastically reducing the chances that an identity thief can appropriate the cardholder’s data. During a contactless payment, a single-use token is sent to the payment terminal to complete the purchase transaction. The token contains no actual card details, making it very unlikely that a hacker can obtain anything of value from that transaction.

Identity thieves with portable NFC card readers don’t pose a viable threat, either. First, they would have to get within 4-10 centimeters of your wallet to access the NFC card data. And, because the card data is tokenized, the thieves would only obtain digital gibberish for their efforts.

How Retailers Can Accept Contactless Payments

Before a retailer can accept contactless payments, they must ensure that they can process customers’ transactions in a secure, efficient manner. Toward that end, all retailers should meet three important standards.

NFC-compatible Hardware

To process contactless transactions, retailers must have an NFC card-friendly point of sale (POS) System. Newer POS systems will have a built-in NFC reader that seamlessly handles Android Pay, Apple Pay, and other NFC payment platforms.

Retailers with older POS systems can purchase a modular NFC card reader or PIN pad that should work well with mobile devices. Ensure that your order includes all applicable cables, brackets, pedestals, or stands required for installation.

Standard credit card payment terminals cost from $150 to $200 for basic countertop models. Adding more bells and whistles will increase the cost accordingly. Mobile-friendly card terminals are even more expensive, with the cheapest models beginning at about $500.

If you see ads for “free card terminals,” that may (or may not) be a legitimate offer. Typically, a payment provider might offer a free terminal in conjunction with a contract and/or monthly membership or service package. Perform your due diligence on the provider before making a decision.

If your business is strapped for cash, a month-to-month terminal rental might serve your needs in the short term. Read the rental agreement carefully, and ensure that you can cancel the service without incurring a penalty. As soon as you can, buy a payment terminal outright.

Avoid leasing a payment terminal at all costs. You’ll likely pay thousands of dollars for a machine that would cost only a few hundred dollars if purchased outright.

In terms of specific devices, here are a couple of credit card terminals that support contactless payments:

Clover Mini LTE

Clovermini Phone Ps

This is a small but powerful POS that lets you ring up sales and manage your business with ease. It allows you to a ccept multiple ways to pay, including contactless and traditional. You can also generate paperless receipts and take advantage of offline payment mode.

Vital Plus

Vital Plus Main

Vital Plus is an excellent option for retailers and restaurants. It’s equipped with a 5″ touchscreen interface, with built-in thermal receipt printer, bi-directional barcode scanner, and Wi-Fi connectivity for line busting and in-aisle transactions.

It also comes with inventory management, pricing, and other handy features out of the box. 

PCI-compliant Software

You don’t have to purchase special software to process contactless payments. Your POS system or NFC-compliant card reader will have the applicable software embedded within the device.

Before using a contactless payment device, businesses must register it with their payment provider, and receive permission to handle customers’ financial information. If card fraud or misuse results from a specific contactless transaction, customers and credit issuers can easily track the problem.

The Payment Card Industry Data Security Standards clearly list financial data-handling rules designed to prevent accidental exposure of sensitive consumer data. If a retailer does not comply with the PCI standards, and still takes customers’ credit card information, they leaves themselves open to cyber breaches.

Significant financial penalties can also result from PCI non-compliance. Depending on the specific PCI violation, and the data volume impacted, a retailer can be fined up to $100,000. The business will also receive negative press along with other possible repercussions.

Branding and Staff Support

To familiarize customers with contactless payments technology, retailers should display appropriate signage near the front door and checkout station.

According to Mastercard, the payment terminal’s “read area” should display the universal Contactless Symbol, which a retailer should receive with their payment terminal accessories. As an added incentive, signage has been proven to spur consumers to tap their payment up to 2.5 times more often.

Retail store staff members can help to ease customers into a contactless payment experience. With prior training, store associates can answer frequently asked questions about contactless payment use. 

Mobile Payment 03

Employees can also assure hesitant customers that contactless payments are completely secure. If necessary, a friendly associate can walk hesitant customers through their contactless payment transaction.

Taking it a step further, Canadian and French merchants with co-branded cards have been very successful with contactless card acceptance programs. Retailers should consider offering rewards and other incentives to encourage customers to switch to contactless card payments.

Additional Contactless Payment Considerations

Before implementing contactless payments, ensure that you understand any special card-related rules that may govern all card purchases in your state or market. Your merchant account provider should be familiar with these guidelines.

In addition, know that some credit card payment providers haven’t yet embraced contactless payments technology. Before signing on the dotted line, confirm that your provider has jumped on board the contactless payments bandwagon. In addition, verify that the provider has the equipment and technology to provide you with the seamless card processing experience your business deserves.

Finding Contactless Payment Providers

Finding a good contactless payment provider should be relatively simple. Your current credit card payment provider should have several POS system models that accept contactless payments. Modular NFC-enabled card readers should also be available.

For a complete POS System, consider Payment Depot’s Clover Station all-in-one POS terminal that accepts all forms of payment. In addition, the system tracks inventory, streamlines your paperwork, and even helps to manage employees. Smaller-scale POS Systems, credit card terminals, and PIN pads are also available on an a la carte basis.

The Future of Contactless Payments

As retailers gradually reopen and expand their operations, contactless payments are likely to remain a prominent part of the card payment landscape. Consumers continue to be leery of handling cash and touching credit card terminals because of fear of exposure to the COVID-19 virus.

Contactless payments resolve both of those issues while also providing other benefits. As Bloomberg notes, experts anticipate touchless transactions to grab an extra 10 to 20 percent of all retail transactions. Simply put, contactless payments are here to stay.

Want to start accepting contactless payments?

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Payment Depot has several options for merchants who want to get into the contactless payments game. If you’re looking for transparent and reasonable credit card processing fees and robust hardware to power your contactless payments, get in touch with our specialists. We’d love to help!

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