Contactless payment allows you to make a transaction simply by tapping or waving a contactless card or payment-enabled mobile device over a payment terminal. It’s simple, convenient, and growing in popularity: In a 2024 survey by the retail news outlet Chain Store Age, nearly half (46%) of U.S. respondents said they’ve used a form of contactless payment in the last seven days.
While contactless payments have a number of benefits, there are also a few drawbacks to this payment method. Read on for key things to know about contactless payments, including how they work, how to know if you can make a contactless payment, and the pros and cons of using tap-and-go technology.
Key Points
• Contactless payment, or “tap to pay,” uses NFC technology for quick transactions.
• Transactions are faster and more convenient than traditional methods.
• Security is enhanced through encryption and tokenization.
• Not all stores support contactless payments yet.
• Transaction limits may apply due to lack of authentication.
How Do Contactless Payments Work?
Contactless payment, often called “tap to pay,” uses near-field communication (NFC) to let you pay by tapping or waving a card, phone, or smartwatch near a payment terminal. Both the payment device and the payment terminal have NFC chips that communicate wirelessly when close together. Instead of sending your actual card number, however, the system uses tokenization — replacing your number with a secure, random token. The token is transmitted to the payment processor, which contacts your bank to approve the transaction. If authorized, the payment is completed in seconds.
What Transactions Are Eligible for Contactless Payment?
For contactless credit card payment to work, both the terminal and card have to have the technology.
Many credit cards and debit cards have built-in chips, but the chip that permits you to insert instead of swipe is not the same as a contactless card. To determine if your card is able to make contactless payments, look for the universal contactless symbol — a circle with a wave (or WiFi symbol turned on its side) inside — somewhere on the card. Contactless payments are also supported by devices using Apple Pay, Google Pay, or Samsung Wallet.
To determine if a payment terminal is contactless payment enabled, check for the universal contactless payments symbol with a hand next to it on the merchant’s electronic payment terminal, device, or card reader.
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Pros of Contactless Payment
Contactless payment comes with a number of advantages:
• Ease of use. With contactless payment, users just have to tap their chosen payment method on the terminal. There’s no swiping or inserting for the transaction to go through.
• Speed. Since there’s no swiping or inserting, contactless payments tend to be faster.
• Leave the wallet at home. If you’ve uploaded your credit and debit card information to your mobile device, you can pay for things without carrying your physical wallet around.
• Security. Contactless payment with chips is more secure than traditional magnetic-strip credit cards. Contactless payments are encrypted. This system makes it much harder for credit card scammers to steal people’s credit card information.
• Hygiene. Contactless payment minimizes contact with shared surfaces, reducing the potential for germ transmission.
Overall, contactless payment may make for faster transactions, and might not even require you to pull out your wallet.
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Cons of Contactless Payment
However, just like mobile banking has pros and cons, contactless payments do have some drawbacks, including:
• Glitches in technology. A card and point-of-sale system might not line up from time to time, resulting in glitches.
• It’s not available everywhere. While contactless payment is being adopted more and more, not every store has it. If there’s no symbol, customers will have to insert or even swipe to pay.
• Potential security concerns. Contactless payments do not require a PIN or signature to authorize. As a result, lost or stolen contactless cards can be used to make fraudulent transactions.
• Limited transactions. It largely depends on bank policies, but because tap to pay doesn’t require authentication, there may be limits on withdrawals and purchase amounts. For more details on transaction limits, contact your bank or credit card company.
Recommended: Guide to Keeping Your Bank Account Safe Online
The Takeaway
While contactless payment isn’t foolproof, it can make purchasing transactions faster, easier, and more convenient. It’s also becoming commonplace as a payment method, and it’s more secure than cards with magnetic stripes. You can weigh the pros and cons of contactless payment to determine if it’s right for you.
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FAQ
What are the pros and cons of using contactless payments?
In terms of pros, contactless payments are fast, convenient, and reduce physical contact, making them hygienic. They also offer enhanced security features like tokenization and encryption.
As for cons, contactless payments can lead to overspending due to the ease of use, and not all merchants accept them. Also, since contactless payments do not require a PIN or signature to authorize, a lost or stolen contactless card or device could potentially be used to make fraudulent transactions. Some users also experience technical issues or limited transaction amounts.
What is the purpose of contactless payment?
The purpose of contactless payment is to provide a quick, convenient, and secure way to make transactions without the need for physical cash or card swiping. Being able to tap a card or device on a reader streamlines the payment process, reduces wait times, and minimizes physical contact. Contactless payments also enhance the user experience and can improve transaction efficiency for businesses.
Why is contactless payment safer?
Contactless payments are safer because they use advanced security features like tokenization to protect your financial data. Tokenization replaces your card number with a unique digital token, making it difficult for hackers to use stolen information. Contactless payment also eliminates some of the opportunities for thieves to steal – or “skim” — your credit card information, since your card never comes into contact with the payment terminal.
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