What Every Business Needs to Know About Contactless Payment
What exactly is contactless payment and how does it work?
Contactless payment works through a chip-enhanced card, and this chip contains the account holder’s information. The card also has an antenna that uses induction technology to receive power and communicate with a card reader.
This hardware enables contactless payment, which at the moment is capped with a £30 spending limit in the UK. This means that the technology is configured for smaller purchases with an emphasis on convenience for the cardholder.
Despite safety concerns, contactless is actually a very secure payment method. Only a certain number of contactless payments – between 3 to 5 transactions - will be processed in succession before a pin number is requested. This limits the potential for fraud.
That’s how contactless works, so who’s using it?
The facts: Contactless payments are booming
In February 2016, there were 63 contactless card transactions a second. These cards were responsible for 1 in 8 of all transactions by late 2015 and totalled £7.75 billion worth of payments over the year.
Clearly, contactless isn’t a fad and usage is only going in one direction.
Where do consumers use their cards? Visa, the payment technology company, estimates that over 400,000 businesses accept contactless payment. This number is growing and it’s soon expected that wherever chip-and-pin is accepted, contactless payment will be too.
A forecast from PaymentsUK estimates that the average UK consumer will use contactless payment 14 times a month in 2025, up from an average of 2 a month today.
What does your business need to think about to prepare for this?
The Business Case: Why your business should consider contactless payment
There is a clear business case for adopting contactless technology today. In addition to improving the customer experience, it can also save you money and increase revenue. Specifically, contactless payment leads to a higher average transaction value and fewer abandoned sales as customers aren’t limited by the cash they carry.
This means a win-win situation for both your business and your customers.
Perhaps most importantly, your customers love it. It’s not long until they will notice the absence of contactless payment rather than appreciate its presence. Especially for small payments in cafes, fast-food establishments, and deli-style outlets, customers appreciate the convenience of a quick tap of their card.
From your perspective, contactless payment isn’t only a nifty system that customers appreciate, there are several compelling business reasons to adopt the technology today:
Speed of Transaction - Payment is processed in seconds. Peak times become less of a bottleneck as you serve customers quicker, and those outside won’t be put off by a long queue.
Correct change not needed – You’ll stop suffering if your business happens to be located far from a cash point. Customers won’t have to walk away if they don’t have cash on them.
Reduced cash handling – There’ll be fewer trips to the bank and no more running out of 1p coins. Your customers don’t like carrying around change, so don’t make them.
Fewer receipts issued – Not automatically printing receipts saves time, so more customers can be served, and you save paper, which reduces your costs.
Audit Trail - Card payments also ensure that all transactions are logged, so there’s less chance of missing any payments.
How your business can adopt contactless payment technology?
The upsides of accepting contactless payments are compelling. Thankfully, it doesn’t take a large investment to get started and begin to benefit from the technology.
With a compatible EPOS system and card payment terminal you can be up and running quickly. After acquiring a contactless card reader, there won’t be additional costs for processing contactless payments over chip and pin transactions.
Finally, make sure it’s clear at the point of sale that you accept contactless payment, otherwise your customers might not even realise it’s an option. Also, train your staff to proactively offer contactless as a possibility. The more your customers use it, the more time you’ll save and the more transactions you’ll be able to process.
Should you wait to adopt contactless payments?
The £30 limit is only likely to rise, having risen from an initial £10 limit to a £20 limit before reaching £30. Even if your business sells products valued above this limit, it makes sense to get ready now. In Australia, for example, the limit is already £50 (AUS$100). It’s unlikely to be long until the UK reaches this limit as well.
So, should you go contactless? If your customers don’t like waiting, and if long queues might be costing your business, then adopting contactless payment is an easy decision.
Ultimately, offering contactless payment is part of creating a better experience for your customers and also happens to result in an easier, quicker payment system for your business. If both you and your customers benefit, then there’s no good reason to avoid contactless technology.