What do we do when we purchase any goods or items from a local shop or a retail store? We take our wallets from our pockets, count our cash, and pay for the purchased item.
And now, when we shop in retail stores, we do the same, go to the cash counter and take out our wallet, but here is a slight change, here, we take out a debit/credit card instead of cash and pay through it, which is termed as contactless payment. Let us know more about it in the further section of this article.
Contactless payment is a safe way for customers to make purchases of goods or services using a debit card, credit card, smartcard, or even through UPI payments which are the newest form of contactless payments. Such payment options make use of radio frequency identification (RFID) technology as well as near-field communication (NFC).
When we are using such type of payment system, we just need to tap our card on the POS (point-of-sale) device, which has contactless payment technology equipped. Some financial institutes are creating awareness among people to make them use such contactless payment modes more often.
Working of the Contactless payment system
As we discussed in the earlier section, contactless payments make people pay for goods and services through debit and credit cards which are equipped with RFID technology. This eliminates the need for consumers to swipe their cards, enter a personal identification number (PIN), or sign for a transaction.
Point-of-sale terminals used by retailers who accept contactless payment feature a unique symbol that identifies the technology. This symbol, which is similar to the Wi-Fi logo but turned onto its side, may be found on such POS devices.
When a consumer is prompted to pay for their purchased goods and services through a merchant’s system, then their payment card is needed to be close to the POS device. As and when the payment card is near the device, through its Wi-Fi connection, the payment card is processed, and the amount is debited from our account.
In simple words, we can say that the bank receives the information that was electronically transmitted utilizing the information on the card. When the system accepts the customer’s tap, they will hear a beep, see a green light, or see a checkmark on the screen and the transaction will be considered finalized once we have gotten the approval.
Customers now have the ability to link their credit cards to a device, such as a smartphone, smartwatch, or fitness tracker, in order to use the contactless payment system. This is made possible by the expansion of wireless technology and the growing use of smart devices. This can be accomplished by downloading a payment app which enables customers to save their credit card and debit card information in a safe location and then make purchases by tapping their smartphone or smart devices.
The maximum transaction amount that can be charged to a card for contactless payments is often capped. The maximum amount that can be spent with a contactless payment system varies by nation and financial institution. To further prevent fraud, some merchants and shops may choose to establish a low restriction for their tap system, while others may continue to permit large transactions. Before approval may be given for a large cash amount, it is possible that a signature will be required, which is a step to ensure a safe transaction.
Is a Contactless payment system good or not?
When we talk about the safety of contactless payment market mode, there are a group of people that say it is good, while the other group believes it is not secure. When people say it is not secured, they mostly refer to the magnetic stripes of the cards.
Magnetic stripes on the back of payment cards can be read by thieves, allowing them to copy the information contained on the cards. Because of this, they are able to rob the information and produce new cards, which can lead to fraudulent activity and identity theft.
On the other side, discussing the positive side, the use of contactless payment methods reduces the amount of risk that is taken on by the consumer as well as the retailer. This is due to the fact that employing them provides a higher level of protection than using the magnetic stripes found on the back of payment cards.
On the other hand, the information that is submitted through the merchant terminal in the process of contactless payment is encrypted, making it harder to intercept and steal. In spite of these added layers of protection, it is still possible for thieves to use consumers’ cell phones as reading devices in order to steal credit card information from wallets.
The distance across which a card can be read is extremely limited, and even if a thief is able to get close enough to read its contents, they will not be able to replicate the card in any way, whereas cards that have magnetic stripes are an exception to this rule. In spite of this, credit cards equipped with both a chip and a personal identification number (PIN) continue to provide the highest level of protection because they cannot be copied and demand information that is not stored anywhere else on the card.
Customers now have the ability to challenge potentially fraudulent purchases and obtain replacement cards. In addition, there are protective card sleeves and wallets available in the market that prevent readers from accessing the data on your card in the first place.
Growth of the Contactless payment market
An increase in the demand for faster and more convenient transaction modes, as well as a shift toward providing better customer experiences, has led to an increase in the demand for contactless payments. This is expected to drive the growth of the said market during the forecast period because it has led to an increased demand for contactless payments. With this, the global contactless payments market is expected to grow with an exceptional CAGR of 11.2% for the forecast period that ends in the year 2025.
Considering all the facts discussed in this article, we can conclude that the contactless payment technique will have a bolstering growth looking at the awareness among people for contactless payment. Also, with the increased use of such payment modes, the market associated with it will have an exceptional growth rate to earn this market segment substantial revenue in the coming times.