Contactless Payments: What Are They? And Why Should We Care?


Heather Hudson

November 04, 2020

Tap. Beep. Approved.

The three steps to a contactless payment take less than five seconds and are so easy that a toddler could pay for morning (decaf) coffee with a flourish of their tiny wrist.

Although the popularity of this method of payment has been growing for years—it was responsible for $129.9 billion in payments in 2019 in Canada alone — it’s been rapidly gaining steam in the wake of the global pandemic.

Amid concerns about picking up the virus on shared surfaces, contactless payments increasingly appeal to all generations, not just tech-savvy millennials and Generation Z. In fact, a Moneris study found that contactless payments now account for almost half of all transactions. In response to this change in consumer behaviour, the tap limits for Mastercard, Visa, and Amex were raised from $100 to $250 to make it more convenient to pay for larger purchases.

If you’re still inserting your credit card and punching in a PIN or pulling out bills and coins to pay for purchases, you might want to understand how contactless payments can make your life easier and, possibly, safer.

What is a contactless payment?

‘Contactless payment’ refers to the act of paying for a purchase by tapping a microchipped credit or debit card onto a card reader. Information from the microchip in the card is transmitted through radio frequency antenna and the terminal sends an authorization request to the issuing bank, coordinating a response in seconds. There’s no need to enter a PIN or sign on the terminal or a paper receipt to complete the transaction.

Another form of contactless payment is the mobile or digital payment. Consumers with a mobile wallet (an app that securely stores the bank details of a credit or debit card) can hover their smartphone, smartwatch, or other payment device over the card reader and complete the transaction the same way they would by tapping their card. No contact required.

Why should we care about contactless payments? In a word: convenience. And security. Also, it’s more sanitary. Actually, there are many reasons to care about contactless payments:

1. Contactless payments make checking out fast and easy.

Consumers and merchants alike can appreciate efficiency at the checkout counter. Shaving a minute off of every transaction can add up to some real time in a day, especially when you factor in pandemic line-ups.

Contactless payments mean no one is fumbling with a PIN or pen. And customers can slip their card or their phone back in their pocket while the terminal authorizes the transaction. No more juggling a receipt, a purchase, and a card as you make your way out of a store.

2. Contactless payments are more secure than magstripe cards.

Believe it or not, chip cards make it much harder for thieves to steal your information compared to magnetic stripe cards. That’s because the cardholder holds onto the card at all times. And transactions only work in short range, so information can’t be picked up to create a counterfeit card. The customer’s name, bank account number, and three-digit security code are never transmitted during transactions.

Mobile wallets are considered even more secure because the consumer’s card is encrypted by the app and locked behind the phone’s security features. In order to access a mobile wallet, you have to unlock or use facial recognition to open a phone. This ensures that a lost or stolen phone won’t lead to credit card fraud.

Still worried? You should know that the credit card issuer is liable for any fraudulent activity relating to contactless payments.

3. Contactless payments offer more flexibility.

You’re walking down the street on a sunny day when the delicious aroma of freshly baked croissants wafts out of a bakery you didn’t even know existed. You’d give anything for a croissant right now. Except you forgot your wallet at home. And of course you don’t carry cash anymore.

Chances are, you’ve got your phone tucked safely in a pocket. At the very least, there’s a smartwatch strapped to your wrist. (Who leaves home without a smart device?) This is where the convenience of contactless payments becomes next level. If you’ve stored your debit or credit card info in your mobile wallet, you’re able to make spontaneous purchases whenever the craving for a croissant strikes.

4. Contactless payments are more sanitary than other forms of payment.

The global pandemic has opened our collective eyes to the hidden viruses that may lurk on every surface. Door handles. Countertops. Card readers. Although most retailers are vigilant about cleaning payment terminals, it’s not always feasible to disinfectant every crevice on a PIN pad.

We are all trying our best to reduce our risk of contracting and spreading COVID-19 and paying by tap or mobile wallet both help that cause. A small corner of your card is only in contact with the card reader in a spot people don’t typically touch with their hands. And mobile payments don’t require your device to come into contact with the terminal at all. It’s not surprising that nearly 80 per cent of Canadians say they’ll continue to use contactless payments after the pandemic ends.

5. Millennials and Generation Z adults prefer contactless payments.

Why do we care what millennials and Gen Z prefer? Because these segments of the population drive digital growth. If you’re a merchant, you want to make sure you’re letting them tap their card, phone, watch, or other smart device to pay for everything from a pack of gum to an iPad. As digital natives, they aren’t interested in the hassle of carrying cash and prefer to tap a card or use their mobile wallet whenever possible.

No matter how you feel about contactless payment, it’s important to know that it’s here to stay. So, go ahead, stride confidently out your front door with nothing more than your phone or favourite card. You can buy anything, anywhere without touching a thing.

This article is provided for informational purposes only. It is not an exhaustive review of this topic. The content is not financial or investment advice. No professional relationship of any kind is formed between you and PayBright. While we have obtained or compiled this information from sources we believe to be reliable, we cannot and do not guarantee its accuracy. We recommend that you consult your personal finance professional before taking any action related to this information. PayBright is a provider of Buy Now, Pay Later (BNPL) solutions. BNPL providers offer plans with a variety of terms and conditions, including interest rates, fees, and penalties, and have different standards for qualifying for loans. Laws and regulations governing BNPL providers vary by jurisdiction. We recommend that you compare and contrast plans, read the fine print, and conduct detailed research into any BNPL provider before using their services.

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Heather Hudson

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