Last editedJuly 20232 min read
From mobile payments to tap-and-go transactions, many purchases are now completed without any need to hand over your card. Today’s contactless payments come in many forms, but what they have in common is the benefit of convenience. Here’s a closer look at contactless payments and why they should be part of your business’s digital payment solution.
Contactless payments meaning
The contactless payments meaning refers to any transaction completed without the need for physical contact. This type of system can include digital payments made online, as well as in-person purchases made using a smartphone or contactless card. The buyer can check out without physically touching the EFTPOS machine using a technology called NFC, which we’ll describe in the next section.
NFC and contactless payments: how do they work?
Contactless payments are powered with NFC technology, using a specific radio frequency that lets the card or smartphone communicate with the POS reader. Although the card doesn’t need to make physical contact with the payment reader, it does need to be close enough for data to be transmitted over these radio waves – usually about 4cm. This ensures that the reader doesn’t accidentally access data from other cards in the area and enhances security.
While contactless debit and credit cards use NFC technology, so do smartphones like the iPhone and wearables like Fitbit and Garmin. This facilitates contactless payments like Apple Pay. The user can store their card or bank details on their smartphone in a secure mobile wallet, then simply present the device at checkout to complete the purchase. With this method, there’s no need to carry around physical cards at all.
What are the benefits of contactless payment?
There’s been a distinct shift in Australian purchase habits when you compare pre- and post-covid trends. According to Reserve Bank of Australia (RBA) research, the average customer made 625 electronic transactions in 2020/21, up from 275 in the previous decade. The pandemic has helped phase out cash in favour of contactless payments, considered to be more convenient and safer. Customers can grab their smartphone and pay for transactions without any need to key in complicated passwords and pins.
Security is another major advantage of contactless payments – mobile apps are protected with biometric security features. Additionally, magnetic-stripe cards are easier to clone than contactless cards. Data associated with online card purchases is fully encrypted and tokenized, making it harder for hackers to access.
A frictionless payment process usually translates into increased revenue for businesses. When customers find it easier to pay, they’re more likely to make an unplanned or impulse purchase.
Choosing the best contactless payment methods
There are many methods out there, so which type of contactless payment is best for you? Ecommerce businesses might choose to accept contactless payment methods including mobile wallets like Apple Pay, Google Pay, and Samsung Pay. For in-person sales, look for POS that include facilities for contactless cards. All new bank cards in Australia come with built-in contactless payment technology. Visa cards use the payWave system and Mastercard uses PayPass. You and your customers will see this displayed on the card in the bottom right-hand corner. Make sure your customer has activated the bank card to unlock this technology.
Beyond contactless card payments and mobile wallets, additional options now include bank-to-bank contactless payments. Australia’s New Payments Platform facilitates click-to-pay services like PayTo, which allows businesses to collect payment directly from customer bank accounts. GoCardless now offers a PayTo solution to initiate and authorize virtual payments in real-time. All the customer needs to do is use their banking app or click on the link provided to verify payments instantly. It’s fast, convenient, and secure – a win-win for both sides of a transaction.
We can help
GoCardless is a global payments solution that helps you automate payment collection, cutting down on the amount of financial admin your team needs to deal with. Find out how GoCardless can help you with one-off or recurring payments.