What are contactless payments, and how do they work?
Contactless payments are transactions that you can complete by simply tapping or hovering a payment card or device near a compatible reader, without any physical contact like swiping or inserting a card. The technology behind this is Near Field Communication (NFC) – a short-range wireless protocol. An NFC-enabled card or smartphone contains a tiny antenna and secure chip that transmits your payment information when it’s just a few inches from the terminal.
In practice, when you see the cashier’s card reader, you just hold your card or phone close to the symbol on the reader, and the payment details are sent over radio waves almost instantly to complete the purchase.
How is payment exchanged?
When a customer uses contactless payment, their system sends a single-use token to the POS. The token doesn’t carry specific card details and is only good for a single transaction, unlike a standard credit card that you use repeatedly at every retailer.
What can I use to make contactless payments?
You can use contactless credit or debit cards (sometimes called “tap-to-pay” cards) or digital devices like phones and wearables. Most new bank cards today have contactless capability – look for the wave-like symbol of four curved lines on your card, which indicates it’s equipped with an NFC chip.
If your card shows that symbol, you can tap it on a payment terminal to pay. If it doesn’t, you can often request an updated card from your bank, or use a mobile wallet as an alternative. Beyond cards, mobile wallets on smartphones and smartwatches are common forms of contactless payment. Apps such as Apple Pay on iPhones or Google Pay on Android phones securely store your card details and let you pay by tapping your device at checkout. Likewise, many wearable devices (like smartwatches or fitness trackers) have NFC payment features.
Using a phone or wearable is as simple as using a card – once your card is loaded in the app, you just hold the device near the reader and follow any on-screen prompts (for example, verifying with Face ID or fingerprint). It’s an easy and versatile way to tap and go.
Are contactless payments secure?
Yes – contactless payments are very secure, often more secure than traditional magnetic-strip transactions. When you tap to pay with a contactless card, the card’s embedded chip uses encryption to send a one-time code (or token) to the terminal, instead of your actual card number. This means the merchant never sees or stores your real card details, which greatly reduces the risk of your data being stolen in a breach.
Every contactless transaction uses a unique, single-use code that cannot be reused, so it’s extremely difficult for fraudsters to copy or counterfeit a contactless payment. If you’re using a smartphone or watch to pay, additional security layers come into play. Your device will typically require you to authenticate (with a fingerprint, face scan, or PIN) before it transmits any payment.
The payment itself still uses tokenization and encryption, just like a card tap, and it even adds a dynamic cryptogram – essentially a fresh digital signature for each transaction. Plus, because you aren’t handing your card to a cashier or inserting it into a machine, your card never leaves your hand. This all adds up to a very secure system: contactless transactions have low fraud rates, and banks/card networks have built-in protections to monitor and prevent unauthorized use.
Is there a limit on contactless payment amounts (do I need a PIN or a signature)?
It depends on the country and the situation. Many countries set a contactless transaction limit, which is the maximum amount you can pay with a tap before you’re asked for a PIN or signature for verification. These limits (also known as CVM limits) are a security measure to protect against unauthorized use of lost or stolen cards.
For example, a country might allow tap payments up to around $50 or $100; if you exceed that, you’ll be prompted to enter your PIN. In recent years, many regions raised their contactless limits (the UK, for instance, increased its tap limit to £100) to encourage touch-free payments while still maintaining security checks for larger purchases. In the United States, there is no fixed national contactless limit – you can generally tap to pay for any amount.
However, for very large transactions (typically around $100 or more), some merchants or card issuers might require an extra verification like a signature or PIN, similar to a standard card purchase. If you’re using a mobile wallet (Apple Pay, Google Pay, etc.), usually no fixed limit applies at all, because your phone’s biometric unlock serves as authentication for even high-value payments.
What are the benefits of contactless payments for consumers?
For consumers, the biggest benefits are speed, convenience, and safety. Paying by contactless is fast – you just tap and go, usually in a second or two, which makes checkout quicker than fumbling with cash or waiting for a chip card transaction to process. This convenience is a top reason why people prefer contactless payments.
You also don’t need to handle cash or touch the card terminal keypad for a PIN on routine purchases, which is more hygienic and was especially appreciated during the COVID-19 pandemic. Contactless payments can also feel more secure and convenient because you remain in control of your card or device. Since the card never leaves your hand, there’s less risk of it being skimmed or copied by a dishonest cashier, and you won’t forget it at the store after a transaction. Many cards and phones will even allow small purchases via tap without a PIN, making the whole experience seamless while still keeping you protected through the card’s built-in security.
What are the benefits of contactless payments for businesses?
Businesses stand to gain a lot from accepting contactless payments. The primary benefit is faster checkout speeds. Each contactless transaction typically takes only a moment, which helps keep lines moving quickly. Shorter wait times can lead to happier customers and fewer abandoned sales; shoppers are less likely to give up on a purchase because of a long line when payments are flowing efficiently.
Over a day, serving customers faster can increase the number of transactions completed and boost overall sales volume. Offering contactless payments can also improve customer satisfaction and loyalty. Customers increasingly expect modern, convenient payment options; many prefer to tap their card or phone and may actively seek out stores that offer this capability.
By accepting contactless, a merchant signals that they value customers’ time and safety, which can enhance the store’s reputation. In fact, businesses have found that advertising “we accept contactless (Apple Pay/Google Pay etc.)” at the door or register encourages more people to use it, leading to a smoother experience for both shoppers and staff. Additionally, since contactless transactions are very secure, merchants benefit from reduced fraud risk and chargebacks compared to magstripe card payments, which can save money and headaches in the long run.
What hardware do retailers need to accept NFC payments?
Retailers who want to accept NFC payments must have an NFC-enabled POS system. Most new systems have an NFC reader built in. If you have an older system, you may be able to add an NFC reader to the system, but discuss your hardware needs with your POS provider to make sure.
You’ll find NFC-enabled equipment for both countertop POS systems and mobile systems. They all accept the same types of payments but have different functions and capabilities.
How can a business start accepting contactless payments?
To accept contactless payments, a business needs a compatible payment terminal or reader with NFC capability. Most newer point-of-sale systems and card terminals come with an embedded contactless reader by default.
If you see the contactless symbol on your credit card machine or it has the word “contactless” or an NFC logo in the specs, you’re likely already equipped. If you have an older card reader that only takes swipes and chip inserts, you may need to upgrade to a model that supports contactless or attach a peripheral NFC reader.
Check with your payment processor or vendor – they can often provide the necessary hardware and guidance. Setting up contactless acceptance is usually straightforward. In many cases, it’s just a matter of enabling the feature with your payment provider (and registering the device with them so they know you’re using an NFC-capable terminal). No special software is typically required beyond what the modern terminal already has – contactless functionality is built into most new devices and they adhere to the same security standards (PCI compliance) as chip card readers.
Once everything is enabled, you should display the contactless symbol or signage at your checkout to let customers know they can tap to pay.
Note: There are also innovative solutions known as “Tap to Phone” or “SoftPOS” that allow merchants to use a smartphone or tablet as a contactless reader. This means with a supported app, your own phone can act as the payment terminal – a convenient option for small or mobile businesses without investing in additional hardware.
What are the PCI compliance concerns with NFC payments?
Like any credit card transaction, all NFC payment transactions must be PCI compliant. Fortunately, you don’t need special software or equipment to make sure this happens. All new POS systems and add-on equipment to accept NFC payments have the software built in.
Before you can accept NFC payments, you must register the device with your payment provider. Your payment provider will then provide the approval to accept NFC payments. This gives the payment provider the information they need to track all transactions if fraudulent activity occurs and protects both you and your customers.
Does it cost extra to use or accept contactless payments?
No – there’s usually no extra fee for contactless. For consumers, making a contactless payment won’t cost you anything beyond the purchase price; the bank doesn’t charge you for tapping versus inserting the card. For merchants, the processing fees for contactless transactions are generally the same as for traditional card transactions.
In other words, whether a customer inserts their card or taps it, the interchange rates and any transaction fees your payment processor charges will be identical. Implementing contactless might involve a one-time cost if you need new equipment (buying an NFC-capable terminal), but there’s no ongoing surcharge just for accepting tap payments. In fact, payment providers and card networks encourage businesses to use contactless because of its security and speed. As long as you have a standard card processing agreement, a contactless payment is treated just like any other card-present transaction in terms of cost.
Should you advertise that you accept contactless payments?
Yes, all payment providers suggest that you advertise that you accept contactless payments. They provide branded signage you can put at the front of the store and by the register. Mastercard claims that displaying signage makes customers more than 2 times likely to take advantage of the opportunity.
How can you encourage customers to use NFC payments?
Besides teaching customers about the security of NFC payments and the lower frequency of fraudulent activity compared to magnetic stripe credit cards, your associates can walk customers through the process, showing them how it works. Retailers can also offer rewards to customers who choose contactless payments versus standard chip and swipe card transactions.
Do all credit card payment providers use contactless payments?
No, not every payment provider has adopted NFC payments yet. If you want to accept contactless payments, make sure you talk to your payment provider about their ability to accept it. If they haven’t adopted it yet, it’s best to look elsewhere as most customers today look for the option of contactless payments.
Who used contactless payments first?
While the use of contactless payments is still heating up in the United States, Canada, and Europe were the earliest adopters. Most credit card payment companies in the United States, however, are pushing forthe use of the service, especially with COVID-19 and its risks.
Is a signature required with contactless payments?
In most cases, there isn’t a signature required for contactless payments. However, if customers spend beyond a certain limit, a signature may be required for security purposes. Overall, there isn’t a limit that consumers can or can’t spend, but they may have to have a little contact if they have to sign for the purchase.
How widely accepted are contactless payments, and how can I tell if a store takes them?
Contactless payments have become widely accepted across the world. What started years ago as a niche feature is now mainstream: more than two in every three in-person card transactions globally on Mastercard’s network are contactless as of 2023.
In many countries, such as Canada, the UK, Australia, and much of Europe, tapping a card or phone is a very common way to pay for everyday purchases. The United States was a bit slower to adopt, but it’s catching up quickly. By 2023, roughly 85% of U.S. merchants (large and small) had contactless-enabled checkout systems in place, and virtually all new payment terminals support contactless by default.
Major retailers, grocery stores, pharmacies, transit systems, and fast-food restaurants around the world are now routinely accepting tap payments. To know if a store or restaurant accepts contactless, look for the universal contactless symbol at the point of sale. This symbol looks like a sideways Wi-Fi or radio wave icon (four curved lines radiating rightwards). It might be printed on the card reader, shown on the payment screen, or displayed as a sticker at the register.
Many businesses also put logos for Apple Pay, Google Pay, or Samsung Pay on their doors or countertops – those logos indicate that contactless (via phone) is welcome, which also means a contactless card will work. If you’re unsure, you can always ask the cashier, “Can I tap my card/phone?” but chances are the answer will be yes at most places these days. As contactless technology is now standard in new payment equipment, acceptance has become nearly ubiquitous wherever card payments are accepted.
Should you lease a payment terminal?
Payment services providers have many options for credit card equipment, but try to avoid leasing the equipment. Instead, purchase the equipment you need, just make sure it is NFC-enabled. If you are unsure about the payment services provider, you can also go on a month-to-month contract,t giving you a way out should you need to know about the service.
Can someone steal my card information via contactless payments (for example, by “skimming” it wirelessly)?
It’s highly unlikely. Contactless cards and phones communicate over a very short range – only a few centimeters (an inch or two). This means a thief with a hidden NFC reader would have to get extraordinarily close to your card (essentially touching your wallet or phone) to even attempt to read it without your knowledge.
Such proximity would be hard to achieve unnoticed. Moreover, even if someone got that close, the information transmitted by contactless payments is protected. The card doesn’t broadcast your actual credit card number or unlimited data; it sends an encrypted, one-time use code for each transaction.
Any intercepted data would be essentially useless for making fraudulent transactions because it can’t be reused or decoded into your card details. In practice, cases of wireless theft from contactless cards are extremely rare to non-existent in consumer reports. The security measures in the contactless system (encryption, dynamic transaction codes, and sometimes additional device authentication) are very effective.
Of course, you should still treat your cards and devices with the normal care – don’t hand your card to strangers, keep an eye on your accounts for any suspicious charges, and if your card is lost or stolen, report it immediately. But the fear of “RFID skimming” attacks on contactless cards is largely unfounded, given the safeguards in place. Using a contactless card or mobile wallet is considered safe, and card issuers will typically reimburse any unauthorized transactions just as they would with a regular card, providing you peace of mind.