How do contactless payments work?

Mar 19 2021 | Julie Warshaw

Social distancing and other safety measures have led to an increased interest in contactless or "touch-free" payments. In other words, small businesses are looking for ways to accept payments without their employees handling cash, and customers want to avoid handing over their credit cards or touching a payment terminal.
The pandemic changed a lot of things about the way your customers shop. Browsing the aisles and standing in line to pay has been replaced by browsing a website and picking up purchases curbside. Chatting with the cashier? Not very easy when you have to do it through Plexiglass. And handling a credit card or cash that someone else has just touched? No thanks.

What is contactless technology and how do contactless payments work?
Contactless payment technology encompasses a number of different types of payment methods. We've grouped some of the more common contactless payment technologies into two categories, depending on the equipment required by you and your customers:
  • For contactless credit and debit cards or a digital wallet like Apple Pay or Google Pay, you would need a near-field communications (NFC)-enabled payment terminal. The customer can pay by simply holding their credit card over the terminal, or if they're paying from their digital wallet, by holding their phone over the terminal.
  • Smartphones can also scan QR codes that are linked to your business, so customers can pay and go without making contact. Once you've created a QR code, just display the code where shoppers check out. Your customer scans the QR code using their payment app, enters the amount to send, and then pays.
Whether a credit card is able to be used for touch-free payments depends on the actual card itself. Credit card companies have worked hard to transition from swipe-only technology to secure EMV chips, but some chip cards don't have the embedded antenna needed for touch-free payments. You can tell if a customer's card can make touch-free payments by looking to see if it has a wireless wave-like symbol on it. If not, the customer can still pay touch-free using their smartphone to scan your payment QR code.

Measure the growing popularity of contactless payments.
While customers have been making contactless payments for years, the recent pandemic has accelerated the adoption of this type of payment. According to research, 57% of consumers say a store's digital payment offerings impact their willingness to shop there,1 with 26% saying stores must accept contactless cards for them to feel comfortable going inside to shop.2

Accepting touch-free payments is key to reaching digital-native consumers like Gen Z and millennials, with more than 70% in both categories saying that digital payment options are a deciding factor in where they shop.3 That said, digital payment methods are popular with shoppers of every age: nearly 55% of Gen X and 46% of baby boomers and seniors also say digital payment options are important for in-store shopping.4 Contactless payments are beneficial for a variety of reasons.
  • Added security. A touch-free payment creates a one-time, encrypted code that is unique to that transaction. This helps protect the customer's payment information. When shoppers don't need to sign anything or enter a PIN, less of their sensitive personal information is exposed. 
  • Faster check out. Contactless terminal payments usually require only a single action, like tapping the card or pushing an app button on a smart device. Making a QR code payment takes just two steps: scanning the code and entering the amount to pay. Customers can be on their way faster when they're not swiping a card and signing a receipt or handing over cash and waiting for change.
  • Safer for everyone. Even before the pandemic, many shoppers wanted to avoid touching a germy PIN pad. Since the spread of the coronavirus, people are extra careful to keep their distance and limit physical interactions as much as possible. With contactless payments, your shoppers only have to touch their phone or card, protecting themselves and your staff from unnecessary contact.
How to offer touch-free payments. 
You need a contactless terminal to accept touch-free payments from a card or phone, but you don't need any special hardware to accept QR code payments.

You can create a QR code to accept PayPal payments using the PayPal Business app or by logging into your PayPal Business account. Print and place your QR code on your counter, your register, or somewhere else that is convenient for a customer to scan. When the customer is ready to pay, all they have to do is open the PayPal app on their phone, scan the QR code, enter the amount to pay, and press Send.
 Learn more about accepting PayPal with QR codes.

Tips to make the touch-free payment process easy for your customers and staff:
  1. Think about placement. Put your payment terminal on the customer's side of the register, so they don't have to reach over and get too close to your cashier. But make sure it isn't in blocking counter space that your staff might need for scanning products or bagging goods.
  2. Encourage customers to make contactless payments. Because people may choose one store over another based on availability of contactless payments, it's important to let shoppers know they can pay touch-free in your store. Put signs on your front door and around your checkout area telling customers that you accept contactless payments. You can even add messaging to your website, social media pages, and marketing emails so that online shoppers know it's an option when they visit your brick-and-mortar store. 
  3. Train your staff. As more people adopt contactless payments, you may find some customers are making their very first touch-free payment at your store. They'll be relying on your staff if they need help with things like scanning a QR code or accessing their digital wallet.
Touch-free is likely the future of in-person transactions. Contactless payments help keep customers and employees safe, while improving checkout speed and security. When shoppers know they have touch-free payment options, they're more likely to feel comfortable shopping at your store.

The contents of this site are provided for informational purposes only. You should always obtain independent, professional accounting, financial, and legal advice before making any business decision. 

1–4. How We Shop: Measuring the Rapid Digital Shift, survey done in collaboration with and supported by PayPal, August 2020. Methodology: Online survey conducted across 2,163 U.S. consumers.

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Frequently asked questions.

You can use your PayPal account with Google pay in 3 ways: To make purchases at any in-store merchant that accepts Mastercard Contactless Payments, when shopping in an app, or when you use the Chrome mobile web browser to checkout.

In Store: When you use Google Pay to pay in-store, PayPal will use the balance on your account to fund the transaction. If you don’t have enough money in your PayPal balance at the time of purchase, we'll automatically use your bank or debit card to add money in increments of $10 to your PayPal balance first to cover the purchase.

Chrome mobile web browser: If you’re using the Chrome mobile browser and check out using PayPal with Google Pay, you’ll be asked if you’d like to pay with PayPal. If you do, put your finger on your phone’s fingerprint scanner to complete the purchase. There’s no need to log in with your username and password, authenticate using your biometrics, and then pay with any of your available payment methods.

Online or in app: You can choose PayPal from within the Google Pay wallet anywhere you see Google Pay button. If you have not added PayPal to your Google Pay wallet, you will go through linking PayPal account to Google Pay.

Need more help?

How do I turn off automatic top up for Google Pay?  
How do I change how much comes out each time my Google Pay account automatically tops up?
How can I add PayPal to Google Pay?
When will my Google Pay account automatically top up?
How can I withdraw money left over from an Google Pay transaction?
How do I update or reset my Google Pay PIN?
How do I remove PayPal from Google Pay?
How do I make PayPal the default payment method on Google Pay?
Can I have multiple PayPal accounts linked to Google Pay?
What happens if my mobile device is lost or stolen?
How can I get a refund on an Google Pay purchase?
Why do I need to create a PIN for Google Pay?  
Add PayPal as a payment option to any checkout with PayPal Checkout (formerly known as Express Checkout). It can be set up in minutes and offers the convenience and security of PayPal, turning more shoppers into buyers.

How does it work?
With PayPal Checkout, your customers can complete transactions in just a few steps, using their shipping and billing information already stored securely at PayPal to check out so they don’t have to re-enter it on your site. When PayPal Checkout is configured with the default settings, customers must have a PayPal account to complete a payment.

PayPal Checkout is available to any merchant that has API access, and any customer with a PayPal account can use Checkout for their purchases. PayPal Checkout has many options that support many different checkout flows. See our Developer website for more information.
How does PayPal provide accessible services to individuals with special access needs?
PayPal works hard to make sure that everyone who wants to use PayPal’s services can do so, and have a positive experience.  We do this in various ways, including:
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  • We consider accessibility when we design features or pages on our website.
  • We increase the contrast between fonts and backgrounds to make pages on our website easier to read.
  • We make our website easier to navigate without using a mouse.
PayPal welcomes feedback from users regarding the way our company provides services to persons with disabilities. Customer service representatives stand ready to assist persons with disabilities in relation to any feedback or complaints they may have.  If necessary, the feedback or complaint may be escalated to designated individuals within the Customer Service department or other employees of PayPal who will work with the user to address his or her concerns. PayPal will promptly respond to and address all complaints that it receives.

After filing a claim for unauthorized use of your PayPal account, please allow up to 10 business days for us to conduct an investigation. If the claim is decided in your favor, all unauthorized transactions and fees will be refunded to your account.

Here's how to check the status of your claim:
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  3. Click Details next to the claim.
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