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Everything You Need to Know About Contactless Payments (2025)
Contactless payments are now the norm as digital wallets and contactless cards become increasingly ubiquitous, allowing consumers to make secure transactions in a flash with the tap of a card, phone, or wearable device.
Advanced encryption, biometric verification (such as face and fingerprint recognition), and tokenization technologies have made these touchless transactions not just faster, but remarkably secure, alleviating skepticism from both consumers and merchants.
Read on to find out what contactless payments are all about and why they’re so secure.
What are contactless payments?
Contactless payments don’t require physical contact between the buyer’s smartphone or credit card and the POS. To make a secure transaction, customer simply tap a payment card or hover their device..
NFC, which stands for “near field communication,” is the technology that powers contactless payments through a type of radio frequency identification (RFID). NFC transactions take place over a specific radio frequency that enables contactless cards or smartphones to communicate with the payment reader when they’re close together (usually two inches or less).
How do contactless payments work?
Contactless payments rely on near-field communication (NFC) technology, a specialized form of radio frequency identification (RFID), that enables secure data transmission between devices at close range. When a customer taps their contactless card or device on a payment terminal/POS (Point of Sale) terminal, the NFC chip embedded in their payment method communicates with the terminal’s reader.
This technology creates a momentary encrypted connection, transmitting payment details without physical contact. Unlike traditional card payments, no PIN entry or signature is needed for smaller transactions, streamlining the checkout process — creating a seamless experience for customers and allowing business owners to serve more clients.
Contactless payments have become increasingly popular, with consumers relying on digital wallets like Apple Pay or Samsung Pay on their smartphones or smartwatches. These digital wallet applications securely store payment card information and use the device’s built-in NFC capabilities to communicate with payment terminals.
Benefits of contactless payments
Contactless payments offer numerous advantages for consumers and businesses as the technology streamlines transactions while enhancing security and convenience across various payment scenarios. Here’s a closer look at some of those benefits:
- Speed: Contactless transactions are typically completed in under a second. This rapid processing reduces checkout lines and waiting times, allowing businesses to serve more customers and consumers quickly.
- Security: The features built into contactless technology provide robust protection against fraud. Each transaction generates a unique encrypted code, making captured data unusable for future purchases. Additionally, the short transmission range prevents data interception from a distance.
- Convenience: Customers no longer need to fumble for cash or remember their PIN codes, and staff will spend less time counting change, processing physical currency, or troubleshooting card insertion issues.
- Better customer service: With staff freed from payment mechanics, they can focus on more personalized assistance and meaningful interactions with patrons.
- Higher revenue potential: The frictionless nature of contactless payments may reduce psychological barriers to spending, encouraging more spontaneous purchases and larger basket sizes. Additionally, faster checkout times enable merchants to process more transactions during busy periods, potentially increasing daily sales volume without additional staffing costs.
- Environmental sustainability: Contactless payments reduce the need for paper receipts and physical payment cards, contributing to less waste throughout the payment ecosystem.
Why are contactless payments so secure?
While we use apps for everything from ordering takeout to booking spin classes, as a consumer, you may be curious how phones or contactless cards allow for secure transactions. The good news is that contactless payments are a lot more secure than magnetic stripe cards, which were relatively easy to clone.
With these outdated cards, you were more likely to end up as a victim of fraudulent charges and identity theft. In a contactless payment, the data associated with your credit card on file is encrypted and constantly changing. So even if fraudsters were to hack a system, the data they found there would be useless.
What are different types of contactless payment?
There are several ways to use contactless payments:
Cards
Credit cards, debit cards, and even gift cards can be used for contactless payments. Wondering if your payment card is equipped to go contactless? Look for four vertical curved lines that form a “wave” symbol.
Apple Pay
iPhone models with Face ID; iPhone models with Touch ID, except iPhone 5s; iPad models with Touch ID or Face ID; and Apple Watch Series 1 and later all support Apple Pay.
To make a purchase with Apple Pay, wait until the light on the payments reader turns on, and then hold your device up to it with your finger on the Touch ID button.
Samsung Pay
Samsung Pay works on newer versions of Samsung Galaxy devices. To trigger an NFC contactless payment with Samsung Pay, swipe up from the home screen.
Google Pay is no longer accepted in the United States.
To enable contactless payments at your store, you’ll need to invest in a reader. The Square contactless and chip reader accepts Apple Pay, Samsung Pay, and contactless cards.
Magnetic stripe data (MSD) cards versus contactless EMV
When you swipe magnetic stripe payment cards, the payment processor reads the magnetic fields and matches them to your bank account information. However, this data is static, making it easier for fraudsters to lift bank information and clone it onto a new card.
On the other hand, the data on EMV chip cards is constantly changing, making it extremely hard to isolate and extract, which would require accessing the physical chip circuit and manipulating data to get your bank information. This is extremely difficult for even the most sophisticated fraudsters.
Contactless Payment FAQ
How safe is contactless payment?
Contactless payments provide far more secure transactions than traditional magnetic stripe cards, as they don’t expose your complete payment card details to merchants. Contactless payments utilize multiple layers of protection: Each transaction generates a unique encrypted code (called a token) that can only be used once, making any intercepted data useless for future purchases. Most contactless cards and digital wallets implement strong encryption protocols that protect payment information during transmission.
How does contactless payment work on my phone?
Contactless payment on your phone works through a digital wallet app (like Apple Pay or Samsung Pay) that securely stores your payment card information. First, set up your digital wallet by adding your credit or debit cards through the app. This typically involves entering your payment card details manually or scanning your physical card with your phone’s camera. Your bank will verify this information before activating the card in your wallet.
When making a purchase, “wake” your phone and hold it near the POS. Your phone’s built-in NFC will establish a secure connection with the terminal, allowing you to complete the transaction. Have multiple credit cards? Most devices also allow you to set a default payment card and give you the option to easily switch between different cards stored in your digital wallet before completing a transaction.
The transaction uses tokenization technology, which replaces your card number with a unique digital token for each purchase. This means your sensitive payment information is never shared directly with merchants; the payment terminal receives only the encrypted token data needed to process that specific transaction.
What is the limit of contactless transactions?
While there is no fixed limit for contactless payments in the United States, some financial institutions may set their own limits, or you may be able to request customized contactless limits through your banking app or online account for greater control. For larger transactions or multiple cumulative purchases, merchants or card issuers may require verification through a signature or PIN, depending on their policies. Check with your card issuer or banking institution to learn more about your potential limits.
