The top 5 advantages of contactless payments
What is contactless payment? And what are the advantages of using it?
What is contactless payment?
Contactless payment systems are based on RFID or NFC (Near Field Communication) technology. They come in different forms including credit and debit cards, smartphones, smart cards, key fobs or other devices, including wearables (watches, rings...). Payments are enabled via secure contactless systems such as Samsung Pay, Apple Pay, Google Pay, Fitbit Pay, or any bank mobile application that supports contactless.
A new study from Juniper Research has found that more than half (53%) of global transactions at Point of Sale will be contactless within the next 5 years. Contactless is already the preferred choice of payment in many countries with these transactions accounting for more than 50%. This is the case for example in the UK, France, Spain, Australia and many eastern european countries. In the USA, after a slow adoption initially, the market has finally opened up to contactless payment over the past 6 to 8 months.
Within the contactless payment arena, the smart card or contactless card is by far the most adopted means of payment. According to a recent report, the global smart card market is expected to reach $65 billion by 2025 with banking representing about 25%.
What are the benefits?
It is estimated that contactless payments can be completed within 15 seconds and work twice as fast as normal cards. With less processing and handling of cash occurring, transactions are completed at a faster rate, turnover is likely to improve and queues are less likely to build up. As pin numbers are no longer needed and the transaction only needs a tap on a reader, the number of staff behind tills can be cut and therefore can be distributed out onto the shop floor to improve other areas of customer service and shop experience.
If you lose your card or it is stolen you are able to freeze the account or contact your bank who will disregard and amend fraudulent payments. As the user only needs to tap the card onto the reader, the risk of fraudulent activity or theft seems a lot higher.
However, built-in protection ensures that the same transaction doesn't occur twice by accident and that if intercepted, the details and numbers linked to the card cannot be decrypted as unique numbers are used for transactions that don't correlate to card numbers. Also, with a limit set to a small amount ($30 in the UK or €30 in France for example), unless changed, the customer is protected from larger, unauthorised purchases from being made.
Contactless payments aren't restricted to just cards. The NFC technology within contactless readers can interact with phones and connected accessories such as watches or rings. Apple Pay's launch in 2014 allowed users to pay if they had forgotten their card or if it was out of reach, by using their phone to carry out the transaction. This was developed further when the Apple Watch was launched. You can also make the payment from within your wallet without having to remove your card which makes the payment process even easier for the customer.
4. Overall customer experience
As a result of faster, more secure and effortless transactions, shops can see an increase in throughput and a reduction in abandoned sales as the average transaction value (ATV) increases when a customer isn't constrained by the amount of cash they are carrying and the payment process is efficient. For the majority of contactless transactions, there is no verification or requirement to print out a receipt on authorisation unless asked for by the customer or if the transaction is of a higher value. This reduces the time a customer spends at the till.
5. For banks - Brand positioning and increased revenues
By offering contactless options to their customers, banks not only promote a much improved customer experience, they can also offer added-value services and therefore differentiate from their competitors. With new upmarket contactless smartcards arriving on the market such as metal cards, they can also target a more VIP and wealthy clientele.
Want to know more? Read: Metal bank cards - The new fashion accessory for VIPs