The days of digging in pockets to find cash or change are over. While the use of contactless payment has been on the rise, it has seen a steep increase in the time of COVID-19.
In March 2020, 31 million Americans used a contactless card or digital wallet feature. That’s a 150% increase from just a year ago. In a time when limiting contact is paramount, consumers have faith in contactless payment—82% of respondents in a Mastercard survey say the method felt “cleaner” than alternatives.
For those unfamiliar with contactless payment, it might seem like magic, but instead of a magic wand, the customer taps a card. Touch the card or tap the phone to pay for an item without ever interacting with the payment terminal. When done right, it’s a “blink and you’ll miss it,“ lightning-fast transaction.
However, contactless payments aren’t magic—in fact far from it. While they have their fair share of benefits, there are also drawbacks to this payment method.
How Do Contactless Payments Work?
Contactless payment was born out of the chip card. Before then, most cards used the magstripe , which has been around since the 1960s. Chips came around because they are much more secure than a magstripe, an outdated method of payment that makes it very easy for scammers to steal credit card data.
For many of us, “dipping” the credit card into the terminal feels like a pain (and it may feel like it takes longer in some instances). On top of the dip, debit card transactions might require a PIN to go through, adding to the lengthy transaction. When the card is dipped, the machine reads the card’s security info, completing a safer transaction than the old swipe method. The payment terminal uses RFID (radio-frequency identification), to read the card’s chip.
When payment terminals were upgraded to read the chips, the technology grew by leaps and bounds. The tech that reads chips also enabled machines to accept payment with a simple tap from a card, phone, or even watch. Evolving from RFID, terminals started using NFC (near-field communication), which allows payment terminals to payment methods from a close distance. For a contactless payment to work, the card or device should be 1-2 inches from the terminal.
The technology has evolved so a card doesn’t even have to physically be there for the transaction. If a card has Samsung or Apple Pay technology, it can be added to a phone or smartwatch’s virtual wallet application, allowing consumers to tap to pay from their phone at checkout.
RFID, and in turn NFC technology, has allowed customers to bypass the swipe or dip in transitions, allowing them to pay with a tap of a card, phone, or smartwatch.
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What Transactions Are Eligible for Contactless Payment?
For contactless payment to work, both the terminal and card have to have the technology.
To determine if a payment terminal is contactless payment enabled, look for the symbol that looks like a WiFi signal turned on its side next to a hand with a card in it.
Nearly all plastic forms of payments, debit cards, and credit cards have a chip, but not all are eligible for contactless payment. Some chipped cards are EMV cards, not NFC. Tap to pay is only possible with NFC cards. To determine if a card is NFC, look for the symbol somewhere on the card, like on the SoFi Checking and Savings® World Debit Mastercard ®.
Contactless payment terminals and cards are not as popular in the US as other countries, but given the rate of adoption, its availability is growing. As it rolls out at more and more locations, cardholders might be interested in taking advantage of the speedy new tech.
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Pros of Contactless Payment
Contactless payment comes with some pros for the cardholder:
• Ease of use. With contactless payment, users just have to tap their chosen method on the terminal. There’s no swiping—or dipping and waiting—for the transaction to go through.
• Speed. Since there’s so swiping, dipping, signing, or entering a PIN, contactless payments tend to be faster.
• Leave the wallet at home. If smartphone users have Google, Samsung, or Apple Pay on their phone and upload their credit and debit card information, they can pay for things using their smartphone. It makes it possible to leave the wallet at home when people might not want to bring a wallet.
• Security. Contactless payment and NFC technology are light-years more secure than traditional magnetic-strip credit cards. Contactless payments have authorization on both sides, basically, one time codes the machine and the card use to link up. This system makes it much harder for scammers to steal people’s credit card information.
• Hygiene. Dollar bills and coins are dirty and can serve as host to a world of bacteria and viruses. Since it passes hand to hand in retail, customers and employees alike might be picking up germs. As we all become more germ conscious, alternatives like contactless payments keep touching to a minimum.
Overall, contactless payment may make for faster transactions, and might not even require you to pull out your wallet.
Cons of Contactless Payment
Of course with the good comes with the bad. Here are a few hang-ups that might happen with contactless payment:
• Glitches in technology. A card and point-of-sale system might glitch from time to time. Depending on the tech the point-of-sale system has, and the customer’s card, things won’t always line up.
• It’s not available everywhere. Contactless payment fans will have to keep an eagle eye out for the contactless pay symbol on terminals. While it’s being adopted more and more, not every store has it. If there’s no symbol, customers will have to dip or even swipe to pay.
• Privacy. Contactless payment is secure, but when customers use payment apps on their smartphone or watch, they may be unknowingly sharing data from their device. If someone is particularly private, they may want to avoid contactless pay.
• Limited transactions. It largely depends on bank policies, but because tap to pay doesn’t require authentication like signing or a PIN, withdrawals and purchase amounts may be limited . For more details on transaction limits, cardholders should contact their bank.
Contactless payment has its own set of drawbacks. It’s up to the cardholder if the positives outweigh the negatives.
Contactless Payment with SoFi Checking and Savings®
While contactless payment is not actually magic, it is just a matter of having the right card. SoFi Checking and Savings® World Debit Card is not only NFC enabled, but it’s also Apple Pay and Samsung Pay compatible.
SoFi Checking and Savings® is a mobile-first, checking and savings account that makes it easy to pay by phone as well as manage accounts securely. On top of that, it has security in mind with features like two-factor authorization and the ability to freeze and unfreeze the card right in the app. Whether SoFi Checking and Savings® holders save, spend, or earn, they’re all eligible for membership benefits like no ATM fees at 55,000+ ATMs across the globe and no account fees.
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SoFi members with direct deposit can earn up to 3.00% annual percentage yield (APY) interest on Savings account balances (including Vaults) and up to 2.50% APY on Checking account balances. There is no minimum direct deposit amount required to qualify for these rates. Members without direct deposit will earn 1.20% APY on all account balances in Checking and Savings (including Vaults). Interest rates are variable and subject to change at any time. These rates are current as of 11/3/2022. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet
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