The Rise of Contactless Payments

Contactless payments are the way of the future in our new normal.
Application Innovation / Data & Analytics / Financial Services / IT Consulting / Software Development / Technology

The Rise of Contactless Payments

From the trading of goods to cash to credit cards, customers have found many different ways to pay for the goods and services they want and need. It has been estimated that digital payments will reach close to $4.8 million by the end of 2020. Moreover, contactless payments are expected to reach $6 trillion by 2024. Over half of the transactions will be on Apple Pay (52 percent).

There is no doubt that contactless payments were become more mainstream prior to the COVID-19 pandemic. Yet, the global health crisis has pushed many consumers and retailers to more seriously consider adopting contactless payment technology.


What are Contactless Payments

Contactless payments are simply a method of paying for goods or services without using physical methods like cash or cards. The most common example is when customers use their smartphones to pay for a coffee.

As technology advances, more and more businesses are installing the technology to make it possible for customers to use contactless payments. According to Forbes, contactless payments have increased 150 percent since last year.

Contactless payment relies on radio wave frequency identification, which is a technology that is designed from electromagnetic fields. They use memory chips or tags that have data and RFID readers that can decode the information that is stored. This is how these machines communicate with one another like a smartphone and a point of sale machine. More specifically, contactless payment is built with near-field communication or NFC, which is part of the RFID technology. The importance of NFC is that the two devices can only communicate with each other within a short distance. So, it secures the data that is stored in the memory chip or tag from being used unless you are close to a reader. This is the prime technology that smartphones use for contactless payments.

There are many other ways that NFC is being used including to pay for public transportation tickets, and as some bank ATMs.


The Benefits and Considerations

There are a number of benefits and considerations that individuals and businesses should think about before they adopt contactless payment technology. These include:


  • Convenience – Consumers want a quick and seamless shopping experience. Using contactless payments can reduce long lineups at the checkout and be a quick and easy way for customers to get what they want. It can also help people avoid that awkward moment when they realize they’ve left their wallet at home. In this case, a customer can simply use their phone to buy what they need.
  • Decrease the spread of COVID-19 – Many people and businesses have stopped using cash in an effort to avoid spreading the coronavirus. With contactless payments, customers no longer have to worry about the spread of diseases and germs.
  • Loyalty programs – Contactless technology can help more businesses sign customers up for loyalty programs. Rather than being asked to fill in a form at the counter or check out, customers can be directed to a landing page on their device that helps them sign up quickly. Moreover, once they make a purchase that qualifies them for a benefit from the program a notification can be sent to their phone so they take advantage of the offer.
  • Compatible with wearable technology – Another advantage of NFC technology is that it is not limited to smartphones. That means smartwatches and other wearable technology can be used to make contactless payments. This improves the customer experience and ease of purchase.
  • Secure – Businesses that use contactless technology have the peace of mind that their payments are secure not just for their customers but for their own banking as well. By moving away from staff handling cash, there is also a reduction in calculation errors and the time it takes to complete a transaction. Contactless payments also reduce the likelihood of theft that comes with having a significant amount of cash on hand.



  • Privacy – Some consumers are skeptical of contactless payment technology, fearing that criminals could somehow obtain secure information hidden in the tag. There have been some media stories about how skimming has led to information theft of contactless payment data. However, even if a criminal is able to get some of the data, it is not as easy for them to use the information to make purchases. It is still much more likely they will try and steal your credit card, which they can quickly use to buy things before you even notice it is gone. Most merchants and credit card companies also provide some protection for consumers using contactless payments.
  • Not accepted everywhere – There are still quite a few payment systems that don’t accept contactless methods. Unfortunately, at these businesses, customers will simply have to pay old-school style with a card. Over time, as the industry continues to grow, these businesses will be forced to upgrade their technology because of consumer demand.
  • Not accessible to people without smart devices – While there are over three billion smartphone users around the world, many still do not have access to the technology. The reality is that not everyone will be able to take advantage of contactless payments.


The Future of Contactless payments

The contactless payment market is expected to grow in the coming years and with the growth will also come changes and new opportunities. Some of the predictions about where contactless payments may go next include:

  • Replacing cash transactions – While there has been a move towards cashlessIT transactions in an effort to avoid the spread of germs, COVID-19 has fast-tracked the move to a contactless payment society. Statistics show that 27 percent of businesses in the US saw an uptick in the number of shoppers using contactless payment methods since the pandemic hit.
  • More popular than credit cards – While credit cards have a secure PIN number that customers enter when making a purchase, contactless payments are even more secure as the shopper has to unlock the phone either with a passcode or biometric data (like a fingerprint). Using contactless payments allows customers to avoid touching a point of sales keypad, which can also reduce the spread of disease.
  • Rising spread of technology among retailers – one of the reasons that contactless payments have not been more widespread is that retailers and businesses are not required to update their technology. However, that hurdle will soon be tackled. The Payment Cards Industry Security Standards Council has recently released regulations surrounding contactless payment technology. This points to the Council’s desire to encourage businesses to adapt to the technology. “Providing the payments industry with standards and resources that support secure payment acceptance in new and emerging card and card-rooted payment channels is a key focus for the Council,” PCI SSC Standards Officer Emma Sutcliffe was quoted in the press release.  “The PCI CPoC Standard is the second standard released by the Council to address mobile contactless acceptance.”
  • Tipping capability – consumers in the US love to tip those in the service industry. However, adding a tip to the total bill is more of a process than simply waving your phone at an NFC device. It also means that customers need to touch the POS keypad, increasing their exposure to germs and bacteria from other customers. This problem can be overcome by those using contactless payment technology from their smart device. Rather than use the POS keypad to indicate their tip preference, customers may be able to use their own screen to leave a tip. After tipping using contactless payment technology becomes more commonplace, it will also become a more popular payment method.
  • Bitcoin and cryptocurrency – as people get more and more accustomed to using digital currency like Bitcoin, they will also become more inclined to use contactless payment technology.