What Is Contactless Payment and How to Use This Payment Option

Contactless payment options are nothing new, but consumers in the United States haven’t been as quick to embrace the technology as residents in other countries. However, that’s been changing in recent years.

“COVID gave it a real push in adoption,” says Ramanathan Srikumar, chief solutions officer with Mphasis, a technology company that provides payment services among other things.

During the pandemic, contactless payments became the preferred way to limit personal interactions and maintain social distancing. While the threat of COVID-19 seems to have subsided, contactless payments are likely here to stay.

“As consumers, our thoughts have been expanded,” says Sofiat Abdulrazaaq, CEO and co-founder of Goodfynd, a company that helps people find and book food trucks. The pandemic helped people realize there are ways to pay without passing off their card — or even using a card.

If you aren’t familiar with these types of payments or are concerned about their security, keep reading for everything you need to know about contactless payment options.

[READ: The Best Payment Apps.]

What Is Contactless Payment?

As the name suggests, contactless payments are those that don’t require consumers to ever hand over a card or touch a payment machine.

“It’s being able to pay with your credit card or debit card without physically entering it into the terminal,” says Steve Goddard, fraud market expert with Featurespace, a U.K.-based firm that uses machine learning to protect people and businesses from card fraud and other financial crimes.

Contactless payments are touted as being faster and more convenient for consumers and businesses alike. A global consumer study by Mastercard in April 2020 found contactless payments are up to 10 times faster than other in-person payment methods, and 82% of the 17,000 consumers surveyed thought contactless payments were cleaner as well.

What Types of Contactless Payments Are There?

Today, contactless payments generally fall into one of three categories:

— Contactless payment cards.

— Mobile contactless payments.

— Payment by code.

There are other methods — such as ordering online or over the phone — which are contactless as well, but discussion around contactless payments typically centers on in-store purchases.

What Is a Contactless Payment Card?

Using a method known as tap to pay, a contactless payment card eliminates the need to touch a payment terminal. This payment option requires that a retailer have a sales terminal equipped with near-field communication, or NFC, technology and that a customer have a compatible credit card. Contactless payment cards will have an antenna symbol, with four curved lines, on their front or back.

The customer taps the terminal with their card to complete the payment. Information sent by the card is encrypted and tokenized to keep data secure. That makes these transactions as safe as swiping or inserting the card into the terminal.

Although more convenient than traditional card transactions, contactless payment cards may soon be surpassed in popularity by other options. “The trend is to not only be contactless, but to be cardless,” Abdulrazaaq says.

[Beyond Paypal: Find out How Venmo and PayPal Payments Stack Up. ]

How Mobile Contactless Payment Differs From Using a Card

Mobile contactless payments rely on a mobile device, rather than a card, to complete a transaction. While all contactless payments use similar technology, adoption of mobile contactless payments has previously lagged behind that of contactless payment cards.

The 2021 Visa Back to Business Study found 62% of consumers surveyed expect to be able to tap their credit or debit card for payment. However, only 41% expect to be able to use mobile payment apps.

That may change as more people adopt digital wallets. The number of global digital wallet users is expected to grow from 2.6 billion in 2020 to 4.4 billion in 2025, according to a study from Juniper Research.

“With your phone, it might already be in your hand,” Goddard says. “You swipe it and you’re away.”

Kinds of Mobile Contactless Payment

Contactless payment companies have been innovative in recent years, and there are a number of ways to make payments with your mobile device. Here are the three main categories:

Mobile wallets: Apple Pay and Google Pay are among the best-known apps for contactless payments. They work in the same way as a contactless payment card, with customers tapping their device on a payment terminal.

Wearable devices: For those who don’t want to carry a phone or wallet, wearable payment devices offer convenience. Originally thought of as a way to make fitness trackers more versatile, wearable payment devices are poised to become an $82 billion global market by 2026, according to a report by MarketsandMarkets.

Scannable codes: Retailers and restaurants that use this method provide a QR code — also known as a quick response code — for customers to scan using their smartphone. Payment information can then be added or confirmed on the phone so no cash or card needs to change hands.

Although not seen as often in the U.S., scannable codes are commonplace in other countries. “Today, if you go to India, everyone has a mobile code and they expect you to pay with a QR,” Srikumar says.

[Dig Deeper: Here’s Our Guide to Using Payment Apps Wisely. ]

Why Are Contactless Payments So Secure?

Although some people worry about someone standing close by and skimming data from a contactless payment card, that isn’t likely to happen. “It’s a legitimate concern, but it’s not as easy as picking a pocket,” Srikumar says.

The card can only be read if it is very close — within one or two centimeters — to a payment terminal. Once it is that close, the power from the terminal “wakes” up the chip and prompts it to relay data. Transactions also include a one-time code that adds an extra layer of security.

“The chip is almost like a fingerprint that makes it harder to copy and duplicate,” Abdulrazaaq says.

Beyond that, data from a contactless payment card or mobile device isn’t something that can be intercepted and deciphered without a point-of-sale device. What’s more, many mobile devices have multi-factor authentication that provides additional security to ensure someone doesn’t gain unauthorized access to a digital wallet.

Even in the post-pandemic world, contactless payments are likely to continue to be popular. Nearly two-thirds of those surveyed by Visa for its 2021 Back to Business Study said they expected to use contactless payment options as often or more often in the future than they do now. Fortunately, they have plenty of choices at their disposal.

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What Is Contactless Payment and How to Use This Payment Option originally appeared on usnews.com

Update 06/21/22: This story was published at an earlier date and has been updated with new information.

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