What is Contactless Payment?

Over the years, contactless payment has revolutionized the payment industry. Its adoption has been on the rise globally, with the UK, South Korea, Canada, Australia, and the United States leading in the use of contactless payment. This payment system keeps evolving. This article walks you through the definition of contactless payment, how it works, the technology behind it, examples, its history, and the benefits of the payment system.
Mykhailo Glodian
Mykhailo Glodian
Head of Growth @ MeaPay
What is Contactless Payment

All You Need to Know

Over the years, contactless payment has revolutionized the payment industry. Its adoption has been on the rise globally, with the UK, South Korea, Canada, Australia, and the United States leading in the use of contactless payment. This payment system keeps evolving. This article walks you through the definition of contactless payment, how it works, the technology behind it, examples, its history, and the benefits of the payment system.

What are Contactless Payments?

Contactless payments, also known as tap-and-go, are payment systems that process secure transactions with near field communication (NFC) and radio-frequency identification (RFID) by tapping contactless cards or other devices near a payment terminal.
The card or device (mobile phone, wearables) and the payment terminal are both equipped with contactless technology.  So, when the card is waved over the point-of-sale payment terminal, it captures the card information and processes the transaction accordingly.
According to mobile contactless findings by Statista, there were about 440 million contactless payment users worldwide as of the end of 2018, but the number was forecasted to reach a new total of 760 million users at the end of 2020. The global contactless payment market size was valued at $1,168 billion in 2019. It is forecasted to reach $5,424 billion by 2027 at a CAGR of 20.6% from 2020 to 2027.
Even though the United States is slow in adopting contactless payments, the pandemic stimulated a huge rise in the use of contactless payments in the U.S. This was due to the lockdown order and restrictions. As a way of maintaining social distancing and taking necessary precautions, people switched to contactless payments to curtail the spread of the infection.
In a study conducted by Capgemini in August 2020, 64% of respondents admitted that they used contactless payment cards throughout the Covid-19 pandemic. According to the survey, about 41% of consumers used contactless cards for the first time.
Gradually, Americans are beginning to embrace the contactless system of payment.  The adoption of contactless payments in the U.S grew by 150% from March 2019 to June 2020 – thanks to the pandemic. That being said, Americans are yet to catch up with the use of contactless payments in other places like Europe, Canada, and Australia.
Contactless payments analytics

How Do Contactless Payments Work?

Contactless payments make use of contactless technologies to process transactions. The payment system utilizes radio frequency identification (RFID) and near-field communication (NFC) to capture card or device information and execute transactions automatically.
Consumers pay for goods and services by hovering a contactless technology-enabled card or device over a payment terminal enabled with the same technology. There is no need to swipe or input PIN or other conventional processes.
Here is how it works:

  • The merchant prompts a consumer to pay for a service or goods.
  • The consumer taps their card or device over the payment terminal enabled with contactless technology.
  • The terminal captures the information on the card or device.
  • The information is relayed to the consumer’s bank and the transaction is processed.
  • The payment system can accept or deny the payment. Whatever happens, the consumers will receive a signal to that effect.


Are Contactless Payments Secure?

The tap-and-go system of payment is secure. It is more secure than the conventional methods of payment. This is due to the technologies that power it, which is difficult for fraudsters to beat. The contactless system works with a one-time code that the system utilizes to process transactions when a user makes a payment.
Bank information transmitted in the process is encrypted. This makes it very difficult for malicious cyber actors to intercept and steal. This is unlike the magnetic stripe where fraudsters can steal card information using a skimming device. However, the contactless payment method is not without a security concern.
The major security downside of this system of payment is the possibility of fraudsters stealing cards or devices. This is a threat because contactless payments do not require a user to enter a password. So, a stolen card can be used by anyone to make payments hassle-free. Banks implement payment limits as a way of curtailing the impact of fraud – in case of stolen cards or devices.
You have to understand how your provider manages fraud and transaction limits before you implement or opt for the tap-and-go method of payment. Beyond understanding how to use contactless payment, security and fraud mitigation are very crucial.

When Did Contactless Payment Start? [Brief History]

The ground-breaking launch of contactless payment dates back to the early 1990s. Since then the adoption of this payment method has been growing globally – with many merchants, retailers, banks, payment companies, etc. adopting the system.
It is most popular in South Korea, Canada, Australia, and the UK. The adoption of the tap-and-go payment method has been slow in the United States – even though that is changing right now.
South Korea created one of the world’s first tap-and-go payment solutions. It was launched in its capital, Seoul, in 1995. It was offered by the country’s transport system. The payment solutions gave citizens quick and easy ways to pay for their transportation bills.
In 1997, Mobil implemented a contactless payment solution called Speedpass. The solution enabled users to make payments quickly and easily at their gas stations where the payment systems were available. The United Kingdom also implemented contactless payment in their transport system, enabling commuters to make payments stress-free.
The first contactless credit cards were offered in the United States in 2004. After that, payments companies like Mastercard, American Express, and Visa created their own contactless payments solutions in 2008. Mobile contactless payments – Google Wallet and Android Pay – were announced in 2011. Apple created its contactless payment solution known as Apple Pay in 2014.
In 2015 the U.S. took a step further to launch EMV. This enabled many merchants to accept payments with contactless methods using the NFC-enabled terminals. Since then, it has been growing in the U.S. and all over the world. The need to decrease contacts during the peak of the pandemic boosted the adoption of tap-and-go payment.

The Benefits of Contactless Payments

One of the major concerns of merchants, consumers, and payments companies is security. The traditional payment methods have more security risks than the contactless methods. As noted earlier, contactless technology makes it difficult for fraudsters to steal and clone payment information. Apart from being secure, contactless solutions come with the following benefits:
For Merchants:

  1. Faster Transactions
  2. Improved Customer Experience
  3. Enhanced Operational Efficiency
  4. Decrease in Cost of Operation


Faster Transactions

One of the major goals of merchants that have high traffic is to process payments faster and decrease customer wait times. Thanks to contactless payment systems that make this possible today. Merchants that implement contactless payment solutions can process more transactions in less time.
Given the fact that customers do not need to enter a PIN or provide signatures when checking out, the time it takes to process payments significantly reduces. Contactless solutions take about 30-50% less time than the conventional card payments methods and more than 60% faster than cash payments. In a nutshell, merchants save a lot of time that can be invested in other productive business operations.

Improved Customer Experience

Significantly reducing the length of time customers spend trying to process payments is an effective way to improve customer experience and retention. No one wants to spend more time than necessary when shopping due to long waiting lines. Merchants that implement contactless solutions enhance the shopping experience of customers.
It has a long-term positive impact on the bottom lines of companies. This is because merchants using tap-and-go systems stand chances of increasing revenue from repeat customers – due to positive customer experience.

Enhanced Operational Efficiency

Contactless payments streamline payment processes and enable merchants to process large volumes of transactions in less time and with fewer workers. This reduces the waiting lines and the pressure on cashiers.
With a significant number of customers choosing contactless payment methods, cashiers have fewer cash or card payments to process. This decreases workload and helps companies to optimize their processes to serve customers better. Contactless solutions reduce the number of cashiers needed and at the same time boost the size of payments per cashier.

Decrease in Cost of Operation

The conventional payment methods require cashiers to process payments. For merchants that have a high volume of daily transactions, they need many cashiers at the checkout point. This can significantly increase the cost of operation. However, implementing contactless solutions decreases the workload on cashiers by a significant percentage.
With fewer workers needed at the checkout terminal, merchants can save on the cost of hiring employees. In cases where employees at the checkout terminal have few transactions to process, they can be deployed to other sections for increased productivity.
For Consumers:

  • Fast and Easy to Use
  • Great Shopping Experience
  • A Good Alternative to Cash
  • Healthy Process
  • Diverse Options


Fast and Easy to Use

Contactless solutions are fast and easy to use. An average person has a lot to do and wants to save time. So, having a payment system that is fast and convenient for customers will improve customer experience – which will attract more customers.
With a tap-and-go payment system, consumers do not need to swipe or insert cards, input PINs or provide signatures when checking out. All they need to do is hover their cards or devices over the post-on-sale terminal. It fastens the whole checkout process and helps consumers to save time.

One of the things that negatively impact customer experience is spending more time than necessary at the checkout terminal because of long counter queues. Contactless payments solve this problem by shortening the checkout process and also decreasing the number of consumers that pay with conventional card methods and cash. The tap-and-pay solution saves customers the ugly experience that comes with joining long waiting lines – thereby improving their shopping experience.

A Good Alternative to Cash and Cards

With the mainstream adoption of the contactless payment system, the need for customers to carry cash and cards when shopping will decrease. In some cases, going out with purses or physical wallets can be discomforting. The tap-and-go payment methods are very convenient and great alternatives to cash and cards – which are not always convenient.

Many Options

Contactless payments work with cards, mobile phones, wearables (watches and fitness trackers), and other devices. Consumers have many options to choose from. Those that are not comfortable with cards can choose from other options according to their preferences.

Tap-and-go Payment Solutions Are Hygienic

Contactless solutions do not require users to make direct contact at the checkout terminal. Customers can make purchases without having to pass cards to the cashier, enter the card information, or handle other devices used by many other customers. This was why many people resorted to contactless technology during the pandemic.

Examples of Contactless Payments

Since the launch of contactless technology in the 1990s, many banks, payment companies, retailers, and merchants have launched their contactless payment solutions. Popular examples include:


Meapay is a mobile contactless payment solution by MeaWallet. It is a Norwegian organization that was established in 2013. One of the goals of this solution is to facilitate the growth of the payment market by making it easier for merchants to adopt contactless technology. The company offers a secure SoftPos contactless payment solution.
About MeaPay

Google Pay

This is a comprehensive payment solution developed by Google. It is a digital wallet and online payment technology that enables online payments, in-app purchases, and in-person contactless payments, all using Google devices – Android phones, watches, or tablets. It has features for peer-to-peer transfer using email addresses or phone numbers.

Apple Pay

Apple Pay is a payment solution developed by Apple Inc. It is only accessible with iOS devices. Apple devices come with the Apple Wallet app, which allows users to save their card information. With this payment system, users can make payments in iOS apps, in-person, and through online payments. Users can as well send and receive money.
The solution features a contactless payment solution and can be used with other contactless payment terminals that are not Apple Pay-specific. Apple Pay is compatible with any merchant that uses tap-and-go payments.

Samsung Pay

Samsung Pay, launched by Samsung Electronics in 2015, allows users to make payments using Samsung phones and other compatible Samsung devices. Users store their card information in the app, which allows them to make payments at checkout terminals. It features NFC contactless payments, as well as a magnetic strip-only payment system.

Contactless Payments Technologies

The Tap-and-go payment system is powered by state-of-the-art technologies. Understanding what these technologies are and how they work is necessary when implementing contactless solutions. The major standards that facilitate contactless solutions are:

  1. Near Field Communication (NFC)
  2. Radio Frequency Identification (RFID)
  3. Magnetic secure transmission (MST)
  4. Quick response code (QR code)


NFC and Contactless Payments

NFC stands for near-field communication and it is a technology that enables contactless payments by facilitating the exchange of information between readers and NFC-enabled devices like mobile phones, smartwatches, and contactless-enabled credit & debit cards. For sharing of data to occur between NFC devices, they must be close together.
The payment information shared is encrypted, as a result, the data is very difficult to intercept by fraudsters. This further explains why NFC contactless payments are very secure. Popular examples of NFC contactless payments include Apple Pay and Google Pay. Beyond its application in contactless payments, near-field communication enables peer-to-peer sharing. Two devices that are NFC-enabled can get connected and share files.

Radio Frequency Identification (RFID)

This is a technology that makes use of electromagnetic fields to identify and track tags placed on materials – everything happens automatically. NFC-enabled devices use radio frequency identification (RFID) to establish connections. However, the frequency of RFID radio waves used by NFC tags or chips is unique and it only functions when the devices are in close proximity.

Magnetic Secure Transmission (MST)

Magnetic secure transmission (MST) uses conventional magstripe technology and modern terminals to enable users to make contactless payments using their mobile devices. It works with magnetic waves and pre-chip terminals. Featured in Samsung Pay, Magnetic Secure Transmission is fast and secure.
Just like the NFC-enabled devices, MST works within a short distance. When an MST-enabled device is brought close to a payment terminal card reader, it transmits payment data via a magnetic signal. MST technology is compatible with most contactless payment terminals.

Quick response code (QR code)

Quick response code is a contactless payments technology that enables tap-and-go payment from a mobile app by scanning a QR code. Paying with this method is very easy. All a consumer has to do is scan the QR code displayed by the merchant, input the payment amount and submit.

Forms (or Types) of Contactless Payments

When it comes to types of contactless payments or how the solution is adopted in real life during in-store purchases, there are major ways contactless technology is utilized. They are:

  • Payment Cards
  • Payment Devices (mobile contactless solutions)
  • Contactless Solution Using Code


Payment Cards

In this form of a tap-and-go solution, contactless-enabled cards are used to make payments at checkout terminals. As explained earlier, there is no need to swipe or insert a card, enter a PIN or operate any payment device at the payment terminal. Once a customer hovers the card over an NFC-enabled terminal, a connection is established. Payment is processed through the exchange of encrypted & tokenized payment information between the card and the terminal.

Payment With Devices (Mobile Contactless Payments)

This type of contactless solution uses devices that are enabled with contactless technology instead of cards to process payments at checkout terminals. Just like card payments, contactless-enabled devices are brought near contactless-enabled terminals to initiate a transaction.
Once a connection is established, the necessary payment information is shared (as prompted by the merchant) to make the payment. These contactless devices include smartphones, watches, fitness trackers, and so on. Based on this, mobile contactless solutions are categorized into mobile wallets and wearables.
Mobile wallets include mobile contactless apps, which work like cards. But in this case, users have to store their card information in the app. Examples are Apple Pay and Google Pay.  As the name implies, wearables are options for those who prefer making payments with things like watches and fitness trackers to cards and mobile phones.

Contactless Solution Using Code

This method uses a quick response code to process payments. Here, users don’t use cards or mobile contactless apps. All users need to do is to scan a QR code, enter a payment amount, and then submit the payment. It is a great alternative in the absence of cash and when the traditional card methods are not possible.
Types of Contactless Payments

The Future of Contactless Payments

According to a Forbes article written by Miron Lulic on the future of contactless payment solutions, contactless payments will supersede cash and conventional credit and debit cards. According to the article, the pandemic-induced adoption of contactless solutions has changed the digital payment landscape and the trend is expected to continue.
Tap-and-go payments are going mainstream and the fintech industry are expected to continue to innovate to solve challenges associated with contactless systems. A survey revealed that about 27% of small business survey respondents experienced a rise in customers adopting a contactless method of payment.
In addition, the benefits of this revolutionary payment method to both consumers and retailers make it a hard-to-overlook innovation. It reduces transaction time, boosts revenue, and decreases counter queues. Consequently, organizations are willing to make the transition – the benefits are worth the cost of transition.

Final Thoughts

Сontactless payments will be a major driver of digital payments in the future. Its global adoption grew exponentially due to the pandemic. And the surge in the use of contactless solutions is projected to keep rising in the post-pandemic world. For users, it is a great way to make safe payments speedily and conveniently.
On the part of merchants, contactless systems have been proven to improve customer experience, enhance payment operations, and boost revenue. There is no better time to adopt or implement contactless payments than now!

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