Contactless payment is one of the buzzwords that’s important to understand. Contactless payment technology has the potential to significantly speed up and simplify transactions since it operates through your mobile device.
Unlike EMV payments, contactless payments offer higher security than card payments. Magstripe cards are quite outdated, as they store static information linked to your bank account. Therefore, it’s not too difficult for fraudsters to steal and duplicate your data if they obtain your card.
On the other hand, Contactless payments are more secure. Here are some details regarding contactless payments and the reasons they are so safe:
A wireless financial transaction is called a contactless payment. The customer makes a purchase by bringing a security token up to the vendor’s point of sale (POS) reader. Popular security tokens for contactless payments are digital smartphone wallet apps and bank cards with chips.
Contactless payments are considered secure since the vendor does not gain direct access to the customer’s billing or payment information.
What exactly is a contactless payment card?
Certain debit and credit cards come equipped with NFC technology, which enables users to pay for goods simply by tapping or waving their card over the payment reader. We refer to these cards as contactless payment cards. Near-field communication (NFC) or RFID contactless cards allow quick and secure transactions without requiring direct contact between the card and the terminal. Contactless credit card payments are easy; simply tap or wave your card close to the terminal.
These bank cards have a contactless symbol to inform the cardholder that they can be used with contactless readers.
What makes contactless payments highly secure?
Without any doubt, contactless payments are highly secure options to transfer money or one of the payment methods. Here is why:
- Encryption: Because contactless payments send encrypted data, only authorized parties can access the information. Transactions use distinct codes that lower fraud risk and make it harder for data to be intercepted or reused.
- Tokenization: Tokenization is a contactless payment method that substitutes random tokens for sensitive cardholder data. This token is only used once, unlike a card number, so intercepting it is pointless.
- Transaction limits: Transaction limits are often present with contactless payments in order to stop fraudulent activity. Depending on the country and issuing bank, users must typically enter their PIN or sign for transactions exceeding a certain threshold.
- There will be no physical contact: Skimming (copying card data using a compromised device) is less likely because the card does not have to be handed over or inserted into a terminal.
- Two-Factor Authentication: Many contactless payment methods require facial recognition or fingerprint authentication.
- Zero-Liability Policies: Zero-liability policies are implemented by numerous banks and card issuers to safeguard cardholders against unauthorized transactions. Cardholders are typically not held accountable for fraudulent transactions.
How does contactless payments work?
Similar to regular credit or debit card payments, contactless payments are made with cards and mobile devices and are eventually handled by financial institutions. The details change depending on whether you use a wearable or a mobile wallet to make a card payment.
Here’s how it usually goes:
- The customer shows their contactless credit card. The customer places the card over a contactless payment terminal at a point of sale. Only newer card readers have this feature.
- The wireless chip is responsible for transmitting card information. Similar to a magnetic stripe, the radio frequency identification (RFID) chip transmits all of the card information when a customer approaches the terminal with their card or, more commonly, taps it onto the terminal.
- The bank and the payment terminal communicate. The financial institution that issued the card will now receive a payment request from the payment terminal. This is usually a credit union or bank. Similar to a standard credit card, the merchant will ask the card issuer to transfer money.
- The transaction is either approved or denied by the card issuer. The card issuer either approves or denies the transaction. The financial institution will approve the transaction if the purchase price matches the purchaser’s bank balance or credit limit. When a transaction is successful, the payment terminal beeps. Alternatively, the bank will reject the transaction if the purchaser lacks the necessary funds or credit.
What are the Types of Contactless Payment?
Here, we are discussing the types of contactless payment options that users can use:
Cards for contactless payments
The majority of tap-to-pay transactions use credit or debit cards that are contactless. A payment terminal receives all of your card information thanks to an embedded chip.
This kind of chip is probably present in a new credit card that your bank issued within the last year. American Express, Mastercard, and Visa issue chip cards.
Payments using a mobile wallet
Using a mobile device, such as an iPhone or Android phone, is how a mobile wallet payment is made. It may also happen through a wearable gadget like an Apple Watch.
A payment app that facilitates mobile wallet purchases must be installed on these devices. These applications consist of Samsung Pay, Google Pay, and Apple Pay.
NFC-enabled wearables are gadgets that you can wear on your body. For instance, using the details in your Apple Pay mobile wallet, you can use your Apple Watch to pay at a contactless reader.
Pros and Cons of Contactless Payment
There are definite advantages to contactless payments for both customers and retailers. The advantages of Contactless Payment consist of the following:
- Security: There is more security with contactless payment systems than with magnetic stripe cards. Scammers exploited the credit card industry for decades, using consumer data stored on magnetic stripes. Most con artists have been thwarted by the encrypted systems used by EMV chip cards and mobile wallets to transfer consumer data.
- Easy access: Contactless payments can be made without customers needing to carry around a credit card. With just a smartphone—or even a wearable device like an Apple Watch—they can access their mobile wallet and leave the house. Customers appreciate the ease of just tapping or hovering their card over a payment terminal, even in cases where they do need to use a physical card. Transactions go even more smoothly as a result than when using a chip card reader or scanning a magnetic stripe.
Despite all of their benefits, contactless payments do have disadvantages. Disadvantages of Contactless Payment:
- Merchant adoption isn’t widespread: While contactless-capable terminals are now standard equipment at large retailers, they are less common in small, budget-conscious businesses. Customers must, therefore, continue to carry cash or a conventional credit or debit card in order to make purchases in any store.
Streamline Your Card Payments with Cheqly
Cheqly’s card payments offer unparalleled convenience and security. This allows you to transact quickly and securely without physically presenting the card, either by using a virtual debit card for online purchases or by adding your card to popular digital wallets like Apple Pay, Google Pay, and Samsung Pay in physical stores.
Transactions are fast and secure with Cheqly, thanks to our advanced security measures, and it’s easy to track expenses effectively through the integration of the Cheqly platform. Cheqly provides a modern, hassle-free payment solution. Sign up for a Cheqly account now!