Pros & Cons of Contactless Payment

Contactless payment using debit and credit cards is now widely used across the UK and internationally, providing numerous benefits for both businesses and the public consumer. The experts at NPI are here to outline these advantages as well as talk about the cons of contactless cards, discussing if chip and pin payments are safer.

What Is Contactless Payment?

Contactless payment is a method of purchasing goods and services via banking cards or apps without the need to insert the cards into a card reader machine and enter a pin code. Instead, consumers can tap or hold their payment method against the reader system. The reader takes the payment information from the cardholder and in seconds, the transaction is completed.

Studies have shown that contactless payments have been increasing since the COVID pandemic, with this way of paying now being the preferred choice.

How Do Contactless Payment Systems Work?

A contactless payment system uses technology called Near Field Communication (NFC) to transmit payment details securely between a card or device and payment reader. When tapping and holding a payment card, smartwatch, mobile device or other means of transaction, the reader will generate a unique cryptographic code and instantly process the payment. This transmits the data to the consumer’s card processing network, be it Visa, Mastercard, American Express or other.

Benefits of Contactless Payments

Now let’s get into the advantages of contactless payments, with this technology not only benefiting consumers but providing key rewards for vendors and businesses too.

1. Enhanced User Experience

Those looking to grab a few things from the supermarket or complete their transactions hassle-free can do so with ease and speed thanks to contactless payments. Without the need to enter card details manually with the added length of payment processing, albeit an extra few seconds, customers spend less time in queues and at the till.

The various ways of completing contactless transactions, including cards and smart devices like watches and phones, also benefit consumers who want alternative ways of paying without carrying around extra personal information.

2. Simple and Efficient Payments for Business

Businesses can benefit by speeding up customer transactions, leading to improved operational efficiency. Contactless payments are very simple, which reduces the risk of errors associated with handling cash and manual card entry. Additionally, businesses can streamline their accounting processes thanks to automated transaction records, reducing administrative tasks, enabling businesses to operate more effectively in other areas and focus on growth.

3. Greater Payment Security

Contactless payments come with built-in protection, including precautions that don’t let the same payment occur twice by accident. Also, each payment uses unique encryptions that are not associated with the payment card or device and can’t be decrypted. Larger purchases may also require further verification, including entering pin numbers or biometric authentication, further enhancing security.

4. Speed of Payment

Picture the traditional payment method with either cards or, indeed, cash. Cash requires the consumer to either count the exact amount out or provide a rounded sum, with the cashier then confirming the amount presented, organising the currency into the correct till slots, and then designating the exact amount of change to be given back to the customer, as well as printed receipts.

With traditional card payments, the speed at which the reader processes the entered card with the punched in pin code is around 15–20 seconds longer than contactless payments. By completing transactions with the alternative contactless method, payments can be completed in less than five seconds on average.

5. Fraud Prevention

As previously mentioned, one of the benefits of contactless payment is the level of security it offers, with fraudulent transactions being drastically reduced. Customers no longer have to hand their cards to vendors and contactless payments also have a spending limit on them, depending on country or region.

These measures help prevent unauthorised use and card cloning, and for businesses, adopting contactless payment methods reduces the likelihood of fraud related losses.

Disadvantages of Contactless Payments

Now we’ve outlined the benefits, let’s explore the main dangers of contactless cards and payment.

1. Limitations

The spending limit is the first main disadvantage, with the UK upping the limit to £100 and Ireland to €50. While this amount is plenty for most consumers on a day-to-day basis, those looking for contactless payment for larger expenses will struggle and be required to revert to manual card or cash payment.

With the various ways of paying, for example with smartphones, the device usually requires adequate charge for the payments to complete. Additionally, limits can be set by the vendors, with many shops requiring a minimum payment sum to buy items.

2. Security Concerns

With contactless transactions, no pin authorisation is required, essentially removing one of the main security measures with modern transactions. So, if a card is lost and or stolen, any person can purchase items without authorisation, leaving it up to the cardholder to freeze their accounts, cancel their card and wait for the bank to reimburse their lost funds.

While contactless payment is now widely used and accepted, certain individuals will still be wary of the security risks involved, meaning some businesses may not integrate contactless payment systems into their business.

Interested In a Contactless Payment System for Your Business? See How NPI Can Help!

The benefits of contactless payment certainly outweigh the disadvantages, with more streamlined payments, improved customer experience and operational efficiency for businesses. However, this popular way of paying requires businesses to have the best contactless payment systems in place.

At NPI, our innovative card reader machines are the top solutions you need to see these benefits. Explore our range of card reader machines or get in touch to discuss your needs.