It could be said that taking payment is the most important part of setting up a business. Contactless payments include those made via enabled credit cards, debit cards, smart cards, mobiles, and key fobs. The ease and speed of contactless payment, where the user simply taps their device to a reader, is what customers want.
Mobile devices use radio-frequency identification (RFID) to make secure payments.
- Remote devices go all the way back to 1898 when Nicolai Tesla demonstrated a radio-control system, using a toy boat.
- An early form of RFID was patented by Charles Walton in 1983.
- In 1995 the buses in Seoul switched to contactless technology.
- London Transport adopts contactless Oyster cards, in 2003.
NFC in retail means that one-step payment technologies are now available at almost any point of purchase, and modern near field communication (NFC) systems are still grounded in Charles Walton’s original ideas.
Mobile banking first came into being in 1997, but this wasn’t always contactless, and pioneering systems relied on text messaging in order for transactions to be confirmed. This approach is still widely used in retail banking and will often be found in start-ups or at the cheaper end of the service providers’ range. The opportunities however, for technical error still make this a relatively cumbersome procedure.
Secure, encrypted information is usually stored on a dedicated chip within the mobile device. Smartphones are the most common contactless payment method and the fact that most shoppers already own one is a massive advantage of this system. The customer simply swipes their phone over the retailer’s machine, or ‘reader’, and the purchase is made.
- In 2011 Orange and Barclaycard collaborated to produce the first mobile pay apps.
- In the same year Google launched the Google Wallet.
- Apple Pay went live in 2014, and other NFC connecting to contactless pay terminals are now being widely taken up.
Tap and pay credit cards came along in 2007. While the universality of the technology is one strong point, it is the speed at which contactless transactions are carried out, that have given this system its wide appeal. The ease of transactions has a third key feature that makes them popular with retailers. Consumers are almost 25% more likely to make small transactions using this technology.
It is sometimes difficult to negotiate the number of providers wanting to secure your contactless payment business. Services offering immediate processing and “0% commission!” may have hidden catches, and it is generally advisable to select a solid, well-established company over another that may appear cheaper at first glance.
Chip and pin readers usually have the capacity to make contactless transactions as well; these are usually rented. Given how fast the payment options are changing, it is worth subscribing to a supplier that will upgrade your machine to keep up to date with emerging technologies. Any retailer who does not have the capacity to take contactless payments risks being disadvantaged. The majority of transactions are expected to be carried out in this way by 2020. Top providers of reader hardware and payment processing include:
- Universal Payment Gateway (UPG)
- Halifax Merchant Accounts
Concerns and Limitations
Typically, no signature or PIN verification is necessary, unless there has been an unusual increase in account activity. It is worth remembering that many millions of payments are made every day but only a tiny percentage of these are fraudulent. While this may prove unnerving at first, the tiny window for fraudulent activity makes contactless payments relatively secure, and user figures show that consumers are rapidly adopting this technology.
Customers need to take care that they swipe specific cards, rather than confusing readers with more than one active device at a time. There are often set spending limits for contactless technology, but this is more than mitigated by the increased spending observed overall.
Any device with a small antenna and a chip can be used for contactless payment. The flexibility of this technology means that the possibilities are endless. ‘Tags’ or stickers can be attached to mobile devices, turning them into contactless payment portals. Already, fashion retailer TopShop has begun selling accessories that are paired with Barclaycard’s bPay. Gloves, wristbands and other wearable tech are likely to be commonplace within the next few years.
It is also worth noting that the new technology means merchants can process payments on their own smartphone or tablets as well. Cloud payments are essentially financial wifi, making payment connection anywhere a real possibility.