Everything you need to know about contactless payments
In today’s day and age, cash as a method of payment does not enjoy a monopoly. Technology has made businesses and consumers aware of digital methods of payment, which are easy, safe and fast, making them a preferred choice of payment. Studies show that eight out of ten payments (globally) are now cashless. Globally, the contactless payment market size is projected to attain the mark of $20.9 billion by 2026, while growing at a Compound Annual Growth Rate (CAGR) of 14.2% from 2021 to 2026.
While the numbers depict a positive outlook on the present situation and the future of payments, it is essential for us to learn and understand the basic concepts of contactless payments.
What is a Contactless Payment?
As one can infer from the name, contactless payment is the mode of payment by which customers are allowed to make payments for goods and services through Debit/Credit Cards, smart cards, or also through other payment devices using the Radio Frequency Identification (RFID) or Near Field Communication (NFC) technology. They also encompass payments transferred through mobile applications, including the Unified Payments Interface (UPI).
With the advancement in the payment methods in India, and all the various payment methods being easily available and user friendly to all, most businesses have now incorporated POS terminals and QR codes to facilitate swift payments.
How do Contactless Payments work?
At present, contactless payments work on the NFC technology, which is an advanced version of RFID. They usually require the receiver and consumer payment systems to be close to each other to do a transaction. The waves from the NFC-enabled devices exchange encrypted payment information, which is then used to allow speedy and secure transactions.
Sellers, who are willing to accept contactless payments, encourage their clients to pay through their POS devices. When the intrinsic payment system accepts the tap or swipe, it alerts the seller with a positive transaction sign. The transaction is finished when they receive an approval from the underlying bank.
Advantages of Contactless Payments
Increased speed of transactions: With fewer cash transactions, and the inclusion of quicker and more advanced payment technologies, contactless payment transactions are completed at a much faster rate. Furthermore, you can avoid queues normally present when cash is the only accepted mode of payment.
Enhanced Security: An additional benefit of contactless payments is that it includes an anti-fraud technology, which helps in preventing fraudulent transactions. As there has been a sharp increase in fraud and cybercrime, stringent security measures for these transactions serve as a huge relief for the customers. Additionally, customers can also set fixed contactless payment limits on their cards to avoid major losses because of fraud.
More efficient customer experience: Due to faster and more secure contactless transactions, sellers witness a boom in sales and a fall in uninterested customers. In addition, the common order value automatically will increase while customers now no longer face the constraint of dealing with cash.
Adoption and usage of contactless payments
With a growing preference for digital payments and the massive rise of contactless transactions, the result of such methods has been more than delightful for customers and merchants. While physical distancing has become a pressing need, consumer behaviour has shifted to contactless payment modes.
As per the NPCI report on digital payment adoption, 1/3rd of Indian families use digital payments in some form. It is also interesting to know that, 1/4 of the families in the lower-income group also use digital payments.
Disadvantages of Contactless Payments
Despite its many advantages, contactless payments do have their fair share of drawbacks.
Limited Acceptance: Retailers are slowly facilitating contactless payments, but consumers remain disappointed with the spotty coverage, mainly among independent retailers. However, there has been an uptick in the last couple of years
Low transaction limit: As per the RBI guidelines, contactless payments have a cap of INR 50,000, in keeping with contactless transactions in India. Entering a PIN will become mandatory for higher price transactions to safeguard against fraud. Some of the customers may also find this rule restricting their usual shopping experience
Security concerns: Since the transaction with a contactless card now no longer requires any PIN authorisation, there may be a fear of fraudulent purchases if the card is misplaced or stolen. It is usually a good idea to allow the issuing financial institution to know about this in such a case. Most banks provide you with a 100% fraud guarantee, relieving you of any responsibility, provided you have been cautious with its use.
What will you require to start accepting contactless payments?
If you are a business owner, then you can switch to contactless payments with ICICI Bank’s Eazypay Merchant Payment services. It is a comprehensive service, catering to an array of solutions, such as POS, UPI, Soundbox, QR and other value-added services. With Eazypay, merchants can choose their preferred POS from options, like
D200/Smart on the move POS.
You can use these solutions by logging in to the InstaBIZ app, registering and linking any Bank Account to get started.
Whether it is a matter of convenience of use or the speed of transactions, contactless payments are slowly carving out a place for themselves. Amongst millennials, the trend of using contactless-enabled cards and phones is intensifying. Businesses are embracing this new technology to empower their consumers and invest in the future of business.