What are contactless payments, and how do they work?

What are contactless payments, and how do they work?

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Contactless payments

Payment options for consumers continue to advance. In recent years, contactless payments have become increasingly popular, and for good reason, which you’ll learn about below. Made with a mobile device, it’s simple and easy to complete a transaction. Any type of business should be aware of what a contactless payment involves, and how they can be used to the business’s advantage.

What are contactless payments?

Contactless payments are a payment method that doesn’t require cash or the swiping of a plastic card and is totally touch-free, as the name suggests. The technology used to make this type of payment is near-field communication, or NFC. This technology uses radio frequency identification, or RFID, to enable communication to and from a bank account.

A contactless payment can be made with a card, simply hovering it over a point of sale system in a store. Or a consumer can use a smartphone, key fob or other device to complete a contactless payment.

A short history of contactless payments

Did you know that contactless payment cards have had a meteoric rise in popularity? Just four years ago, only 7% of payments in the UK were contactless. Now, 83% of people in the UK use contactless payments.

Though the NFC technology that enables contactless payments is nothing new, it is only recently that this technology has been used to facilitate contactless payments. In past decades, it has been used to scan items in grocery stores or for luggage on baggage claims, amongst other uses.

How do contactless payments work?

Contactless payments work through NFC technology. When a purchase is made, the NFC reader or terminal emits a radio wave to another device, which receives it and returns a response to complete the transaction.

When making a contactless payment with a card in-store, for example, the POS system will have an NFC reader that detects the card information once the card is close to the POS device. Since data can only be exchanged within a range of about 4 cm, there is no need to worry about an accidental read by a device that isn’t intended to be used for a transaction.

Different types of contactless payments

There are different types of contactless payments that can be used, including

  • Mobile apps and wallets
  • Debit and credit cards

Below is a short description of how each works.

Mobile apps and wallets

A consumer can complete a contactless payment with an application on their smartphone, tablet, watch or other “smart” device. The user can make a purchase without having a physical card thanks to a wireless connection. There are typically multiple payment options available within a mobile wallet.

Apple Pay, Samsung Pay and Google Pay are included in mobile wallet payment options.

Each of these uses NFC technology, regardless of the type of device used to complete the payment (examples include smartwatches, key fobs and smartphones). The consumer must first download the app they wish to use to make purchases, then link their preferred payment card to use this payment option.

Debit and credit cards

A contactless payment can be made with a debit or credit card if the consumer’s card is compatible with making this type of payment, and the merchant is set up to accept contactless payments. The consumer simply taps the card on the payment terminal or hovers it directly above the card reader to process the payment.

How secure are contactless payments?

Contactless payments are considered to be very secure. EMV cards use smart microprocessor chip technology that secures cardholder credentials and protects communication with POS terminals through cryptography.

Chips in cards are nearly impossible to clone or tamper with, so EMV cards are considered far safer when it comes to fraud than cards with a magnetic stripe. These types of cards have levels of security that are continuously evolving.

Benefits of contactless payments for businesses

Businesses can greatly benefit from allowing customers to utilise contactless payments. This method is increasingly preferred by consumers, and is expected to continue climbing in use well through 2024. It’s clear that a business can benefit from contactless payments in several ways, which are detailed here.


As previously discussed, there are several layers of security involved in contactless payments. Various measures can also be undertaken by the user to promote security, including biometric identification for payments.


Convenience is important to anyone when it comes to making a purchase. The consumer doesn’t have to have their wallet or card present to complete a transaction. Instead, they can use a smart device, which most consumers tend to take with them anywhere they go.


When a consumer uses a chip card in-store, tapping to pay is nearly instantaneous. It saves time rather than inserting a chip card into the reader, then waiting for the transaction to be processed, which is an advantage for the consumer and the merchant alike.


Since the COVID-19 pandemic, reducing physical contact has been at the forefront of people’s minds. A contactless payment removes the risk of having to physically hand a card over to a cashier in the store, or having to touch a PIN pad that others have touched.

Customer loyalty

As anyone running a business can verify, customer loyalty is vital to success. It’s clear that contactless payments are increasingly being used by consumers. If a business isn’t offering the payment methods consumers want, the consumer may end up finding elsewhere to take their business.

Disadvantages of contactless payments for business

Naturally, there aren’t only upsides to accepting this payment method. Here are some disadvantages a business may want to consider about contactless payments.


Though many have smartphones and cards that can be used for contactless payments, there are consumers out there who don’t wish to use these forms of technology. Some consumers might be distrustful of contactless payments, or not know how to properly use them. Others may prefer to pay with cash, which could be an important consideration for a business. Focusing on accepting a range of payment methods desired in each area of operation is essential.

Hardware costs

If a business is not already equipped to offer tap-to-pay transactions, there is a cost involved to acquire this type of payment technology. A business must have the POS reader and computer system that allow this technology.

Technological errors

No technology is error-free, and contactless payments are not an exception. Errors may occur when a customer attempts to complete a transaction. In such a case, the card must often be inserted into the reader.

Settlement times

If you accept contactless card payments, you will face potentially long settlement times, just as you would for any traditional card payment. An easy way around this is to take advantage of open banking. kevin. is at the forefront of innovations in open banking with our POS account-to-account (A2A) payments, which means no long waits for businesses to receive their money.

Spending limits

There are limits on purchases with contactless payments. As such, the transaction may be limited for higher-cost purchases. That can make contactless payments seem less convenient to use for high amounts.

How can merchants accept contactless payments?

A merchant can accept contactless payments once they have a card reader that accepts this payment method, and most merchants have this ability today. The process involves simply having the customer tap or hover their card over the POS device, and then payment will be approved.

What is the future of contactless payments?

Contactless payments experienced growth in recent years, with touch-free payments being preferred during the COVID-19 pandemic. This trend hasn’t slowed, however, and growth is expected to continue.

There are differences in age demographics with payment methods. Younger generations tend to gravitate toward using contactless payment methods more so than older generations. In general, customers are demanding more ease and convenience in their preferred payment methods, and a business offering contactless payments is set up to take full advantage of that preference.

Accept contactless payments with kevin.'s A2A POS payment solution

Want to offer your customers a simple way to pay that has several advantages to your business? kevin. offers the first-of-its-kind POS solution for in-store A2A payments. No new equipment is necessary; the solution works on Wordline and Switchio by Monet+ terminals and can be made available to any business upon request. Experience instant settlements without the card processing fees with kevin.

Marilyn Starkenberg
Content writer
Marilyn has worked in content writing and strategy for nearly a decade. She enjoys doing deep dives into the ever-changing world of open banking and sharing how kevin.’s innovative payment infrastructure can be a game-changer for businesses. Her specialty is breaking down what sound like complex topics and making them easily digestible for all knowledge levels.