What are contactless payments and how to offer touchless payment options?

How do contactless payments work?

The more common contactless payment technologies can be grouped into two categories, depending on the equipment required by you and your customers. On one side, there are contactless credit and debit cards or digital wallets like Apple Pay or Google Pay. Then there are QR codes that can be linked to your business, so customers can scan, pay, and go without making contact.

Whether a credit card can 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.

Benefits of contactless payments

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.¹ 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.¹

There are many benefits of contactless payments, from added convenience to increased payment security to faster checkout.

Contactless payment security

Tap-to-pay and digital wallet transactions don’t include a customer's account details, like their name, account number, card expiration date, CVV, or PIN, which is why some consider them more secure than traditional credit card payments. What’s more, contactless payments use a wireless, secure connection between a shopper's touch-free payment method and the payment terminal. In the process, a one-time code (also known as a token) shares the encrypted payment information with the terminal—and that token changes each time a customer makes a purchase with their digital wallet.

In other words, if someone steals the contactless payment token, it still won’t work for another transaction. It’s worth noting a contactless payment transmission travels, on average, just a few inches, making it unlikely that a hacker could get close enough to intercept it without someone noticing.

Either way, contactless payments require the customer to physically initiate the transaction, making it difficult to send a contactless payment accidentally. In the same way, QR code payments provide added security given they require the user to unlock their phone and/or enter a code to complete a transaction.

Faster checkout with payment terminal

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.

How to use tap to pay

You need a near-field communications (NFC)-enabled payment terminal to accept touch-free payments from a card or phone. A typical process may go like this:

1. The customer checks the checkout terminal for the contactless symbol
2. They tap their card on the checkout terminal, which means they 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.
3. Payment is securely processed

However, you don't need any special hardware to accept QR code payments. 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.

Where to offer tap card payment systems

Tap card payment systems are critical for in-store shopping, allowing customers to pay at their favorite places like retail shops, restaurants, grocery stores, pharmacies, vending machines, and more. In fact, 57% of consumers say a merchant's digital payment offerings impact their willingness to shop in their stores¹, with 26% saying stores must accept contactless credit card payments for them to feel comfortable going inside for shopping.¹

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 cards and 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.

Popular contactless payment methods

There are many options when it comes to contactless payment methods. Here are some of the most popular ones merchants can offer:

1. QR Codes: A QR code is a type of scannable barcode that connects customers with your store's account so they can pay you.
2. Credit and debit cards: Contactless cards contain a small, embedded chip that emits a very short-range signal, so when a customer holds the card close to a contactless-enabled terminal, it sends an encrypted, one-time code containing information tied to their current transaction.
3. Digital wallets (Apple Pay, Google Pay, Samsung Pay): When a customer is ready to pay, they simply open the app, select the payment method they want to use, hold the phone up to the terminal, and press a button to confirm.
4. Store Apps: Some business owners choose to create an app for their store that includes digital wallet functionality.
5. Wearables: Lots of payment apps also have smartwatch integrations that let shoppers pay just by holding up their wrist.

Touch-free is likely the future of in-person transactions. Contactless payments help improve checkout speed and security. When shoppers know they have touch-free payment options, they're more likely to feel comfortable shopping at your store.

You can create a QR code to accept PayPal payments using the PayPal Business app or by signing up for a PayPal Business account. Learn more about accepting PayPal payments with QR codes.