Contactless Payments | Hydrogen Blog
The Benefits of Contactless Payments

The Benefits of Contactless Payments

It wasn’t long ago that the primary way people in the U.S. paid with their debit or credit cards was by swiping the card through a magnetic card reader at the point of sale. Once changing regulations put companies at a higher risk for fraud liability, cards with microchips embedded in them were quickly rolled out. After that, contactless cards soon followed – where all a customer needs to do is wave their card by the reader, and they are good to go. Learn more about touchless payments and how they have changed the way people pay. 

What Is Contactless Payment?

Contactless payment is any method that lets a person pay for a purchase without physically inserting or swiping their card through a reader. Although some contactless payment options are credit or debit cards, others are on smartphones or mobile devices, such as a digital wallet, which stores their payment options. When they are in a store that accepts contactless payments, they need to wave their phone or tablet near the reader to pay.

How Do Contactless Cards Work?

Although it seems like magic, contactless cards and digital payments work because of science and technology. Specifically, the process relies on radio frequency identification (RFID), notably near field communication (NFC). When a card or phone has NFC technology, it can send information through radio waves to a card reader equipped with NFC technology. The two devices “talk” to each other through the radio waves, allowing the payment information to be sent and approved. The process happens quickly, usually within a few seconds.

True to its name, NFC needs objects to be near to each other to work. That means there’s little risk of a person accidentally paying for someone else’s shopping trip as they move through a store or pass by the registers. 

The Rise of Contactless Payments

Contactless payments have been popular in Europe and other parts of the world for years. The U.S. was a little slower to catch on, and it took the coronavirus pandemic to really accelerate the adoption of contactless payment methods. In 2020, tap-to-pay transactions at stores such as pharmacies and supermarkets were up 100% from the year before.

Part of touchless payment methods’ appeal is that a person doesn’t have to give their card to a cashier when they pay. They also don’t need to touch the card reader themselves. Simply hovering the card or their device over the reader is enough for the signal to go through. 

Are Contactless Payments Secure?

Just as chip cards are more secure than cards that only have a magnetic stripe, contactless payment methods are also very secure. When someone pays with a contactless card at a reader, the card sends a unique token, or code, to the reader. The actual account number doesn’t get sent over radio waves. 

If a bad actor is standing by intercepting that data sent by the card to the reader, the information they received wouldn’t be valuable. The token can only be used once and wouldn’t provide a hacker access to someone’s actual account number or other information. 

Contactless payment methods also eliminate the risk of skimming to steal people’s information. Sometimes, thieves attach small devices to card readers, which “skim” the data stored on the cards, giving the hackers access to a person’s account information. Since a customer doesn’t swipe or insert their card when they use touchless payment, there’s no way for a thief to skim their information.

The same is true for mobile apps that use NFC for contactless pay methods. However, it’s worth noting that people who use their Android or iPhone to make payments should take extra steps to secure the devices themselves. A passcode or a fingerprint scan to unlock a device would make it more challenging for unauthorized individuals to access payment information if they steal a phone.

Although contactless payment options are secure, it’s still important for the people who use them to keep their information safe. If a contactless card gets stolen, it’s easy for a thief to use it fraudulently until the theft gets reported and the card gets blocked. When shopping online, people should make sure any sites that ask for card information are secure and encrypted to reduce the chance of a hacker intercepting the card number and other data as the transaction goes through.

For an added security layer, some touchless payment cards can only be used for transactions under a certain dollar amount or require additional verification, such as a person’s signature, when a purchase is above a set amount. 

Benefits and Drawbacks of Contactless Payments

Like any payment method, there are benefits and drawbacks to using contactless payments. Perhaps the most significant benefit is that using a contactless payment system speeds up the payment process. People can move through the line more quickly when everyone is tapping to pay, rather than digging for coins and cash or waiting to retrieve their chip card from the reader. Speedier transactions allow businesses to provide better customer service, as well. 

A contactless pay option also makes it easier to pay for things. For example, some public transit systems have adopted contactless payments or are in the process of doing so. Instead of buying a pass, travelers can tap their card as they move through the turnstile.

One potential risk of contactless payments is something called “card clash.” When a person has two or more contactless payment options in their wallet, and they move their wallet over the reader, there’s a chance that the reader will pick up both cards. In some cases, that can lead to a person paying twice for the same thing — such as when someone uses a contactless card at a subway turnstile. It can also mean a person uses a card they didn’t want to use to make their purchase. 

Another drawback of contactless cards is that not every merchant has adopted them yet. Some companies are still equipped with card readers with a stripe reader and chip reader but not a contactless option. That should only be a mild inconvenience, though, as contactless cards also have a chip and a magnetic stripe. They should be accepted anywhere that accepts cards. Mobile digital payments aren’t always accepted, which means it’s a good idea for a person to have a backup payment option, such as their physical card or cash.

Create Contactless Cards With Hydrogen

Issuing your own cards can help your company increase revenue and boost brand loyalty. Hydrogen can help you create contactless cards that streamline the payment process for your customers. To learn more, sign up to start using our platform today.

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