What are contactless payments and how can small businesses offer them?

What are contactless payments?

Contactless payments refer to payments made without physically touching a payment terminal or device.

Instead of using traditional methods like inserting a card into a chip reader or swiping a magnetic strip, contactless payments use near-field communication (NFC) technology to facilitate transactions between two devices (e.g., a phone and a point-of-sale terminal) in proximity.

How do contactless payments work?

Contactless payment systems 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 that can securely transmit payment data. Utilising NFC technology, transactions occur when users tap their device near a payment terminal.

Whether a card can be used for touch-free payments depends on the card itself. Card companies have worked to transition from needing to swipe or insert a card in a card in a reader to including secure EMV chips. Nonetheless, 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.

Contactless payments can also be facilitated via QR codes that can be linked to your business, so customers can scan, pay and go without making contact.

This way, if a customer’s card cannot be used for contactless payments, they can still pay touch-free using their smartphone to scan your payment QR code.

NFC-enabled credit and debit cards

NFC chips, which are embedded in credit and debit cards, allow customers to securely tap near a contactless terminal to pay with no PIN needed for most transactions under £100.

This method is ideal for customers who prefer to segregate their devices from the funds and pay with physical cards. Note, however, not every EMV chip card is contactless-ready be default. Look for the familiar four‑bar wireless symbol on the card itself to see if your card is compatible.

Digital wallets

Digital wallets store card details securely on smartphones or wearables. Since NFC technology is embedded as standard in most modern smartphones, these devices can be used as convenient proxies for credit or debit cards.

At checkouts that accept digital wallet payments, users simply open the digital wallet app (like Apple Pay®, Google Pay® or PayPal), select the payment method, then tap their phone near the terminal and authenticate via fingerprint or face ID. Sleek, fast and perfect for tech-savvy customers.

Types of contactless payments

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 code, like a barcode, that connects customers with your store's account so they can pay you.
2. Contactless 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: 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.

Benefits of contactless payments for small business

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 secure wireless connection between a shopper's touch-free payment method and the payment terminal.

In this 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.

Contactless payments also 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.

Fast 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.

Increased convenience

No card? No problem.

Whether a shopper forgets their wallet at home or decides to make a purchase in a pinch, using contactless payment methods can help facilitate quick and smooth transactions.

How to accept contactless payments

One of the first steps to accepting contactless payments is acquiring an NFC-enabled payment terminal to accept touch-free payments from a card or phone.

If your current hardware doesn't support contactless payments, you can consider upgrading or replacing it.

When it comes to mobile payment options, consult your payment processor for guidance on integrating them smoothly.

Once your business is set up, accepting contactless payments 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.

Keep in mind that you don't need 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 favourite places like retail shops, restaurants, grocery stores, pharmacies, vending machines and more.

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 the 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 bricks-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.

Tips to promote contactless payments to customers

Ready to offer contactless payments? Now it’s time to get your customers on board. Here are some tips to get started:

• Education: You understand the many benefits of contactless payments, so now it’s time to educate your customers. Launch marketing campaigns explaining the speed, convenience, and security and provide simple, step-by-step instructions on how it works.
• Incentives: Offer discounts, cashback, or loyalty rewards when customers choose to make contactless payments.
• Social media: Encourage customers to post on social media about their experiences using contactless payments with your business. Amplify their voices by featuring their user-generated content on your company profiles, too.

Get the tools you need to accept payments quickly, easily, and securely.

Are contactless payments safe?

• Encrypted safe data: Card and digital wallet transactions use tokenisation (one-time codes that replace real card details) making it much safer than magnetic stripe cards, which store unencrypted data and are vulnerable to cloning.
• Less fraud risk: Fraud detectors, transaction limits and instant alerts all work together to help cut unauthorised transactions. Plus, digital wallet payments through Apple Pay® or Google Pay® often require biometric or passcode checks.
• Card safety: The £100 contactless cap and anti-fraud measures, like random PIN prompts, minimise losses if fraud should occur.
• Leave the cards at home: With a digital wallet stored safely in your smartphone, you can leave your physical wallet at home, reducing the risk of loss or theft.

Accept contactless payments with PayPal

Whether it’s app-based, QR code or tap‑to‑pay, PayPal can support contactless.

• No hardware needed: Use your phone or existing POS terminal, with transactions automatically encrypted and tokenised.
• Flexible payment methods: Accept cards, Apple Pay®, Google Pay®, Samsung Pay, Venmo, QR codes and more.
• Quick access to funds: Payments land in your PayPal balance or bank account, often the next day.
• Rock‑solid security: PayPal’s encryption, fraud detection and tokenisation support safe transactions across all channels.
• Integrations aplenty: Streamline operations and smoothly integrate with your ecommerce platform, POS or accounting software; contactless included.

Accepting contactless with PayPal helps you offer your customers modern, trusted payments.