Everything You Need to Know About Credit Card Processing and Contactless Payment Options

A customer making a purchase through a contactless point-of-sale terminal.

The way businesses collect payments for goods and services has changed since the COVID-19 pandemic began. Many places have done away with accepting cash, to limit contact with customers. In place of cash, businesses are promoting a new way to pay using various contactless payment options.

What Is a Contactless Payment?

A contactless payment is a method to pay for goods or services using various technologies without having to touch a card processing terminal. The technology has been widely used overseas for several years and has recently gained momentum in the United States, largely in part to the COVID-19 pandemic.

Contactless payments often refer to purchases made in-person, not online or through a mobile app. However, some people are now adding virtual purchases made online or through a mobile app as another type of contactless payment method.

What Is a Contactless Credit Card?

A contactless credit card is a credit card that has an EMV microchip embedded in the credit card. The microchip can be used to wirelessly transmit payment data securely when placed near a credit card processing terminal.

To pay for goods and services, one simply taps the card on a specific location on the credit card terminal so the data in the EMV microchip can be read by the terminal and the payment processed.

A variation of a contactless credit card is where the physical credit card’s data is stored virtually on a smartphone in the device’s wallet. When stored in the wallet, the card data is often encrypted and will be a different card number from the physical card. This is to help reduce the likelihood of fraudulent transactions.

When using a smartphone to make contactless payments, the wallet is opened, the credit card selected, and then the phone is placed about an inch above the credit card processing terminal. The phone does not need to be tapped or touched against the terminal.

Why Are Contactless Payments Essential for Businesses?

Contactless payments have become essential for businesses during the pandemic and will continue to be vital for the foreseeable future. The objective of contactless payments is to limit contact with the number of people who physically touch the credit card terminals.

By encouraging contactless payment from your customers, you can reduce the frequency of sanitizing the credit card terminals in between each transaction since there was no physical contact with the terminal. In addition, contactless payments are more secure and safer compared to inserting the card in a chip reader or swiping it through the terminal.

Furthermore, by offering contactless payment options for customers, they are more likely to appreciate the new ways they can pay for their goods or services. So, a secondary benefit of contactless payments for businesses is it helps them provide better customer experiences, increases customer satisfaction, and further builds customer loyalty.

What Are Some Contactless Payment Options?

We already mentioned using the EMV chip and “tap and go” method and using a smartphone’s wallet as contactless payment options. While these two methods are quite popular, another type of contactless payment option that is starting to be used more and more by businesses is their own retail app. These apps allow customers to preload various payment types into the app, including credit cards, debit cards, and reloadable gift cards.

Yet another type of contactless credit card technology adapted by businesses is allowing consumers to use smartwatches to pay for goods and services. The customer has to enable this feature on the smartwatch and tie it to an appropriate payment method.

When they are ready to pay for goods and services, they simply hold the smartwatch about an inch or so above the credit card processing terminal.

What Is Required for Contactless Credit Card Processing?

: A customer making a contactless purchase through her smartwatch.

Businesses that want to offer contactless payment options for their customers need to make sure they have the right credit card processing equipment. This could require businesses to upgrade their payment processing terminals to new equipment.

Businesses that already have EMV chip card reader equipment might only need to upgrade the firmware to enable contactless payment options. In other cases, where the business used their POS system to process payments, as was common in many restaurants pre-COVID, they now may need to invest in new contactless credit card technology equipment.

Aside from having the right equipment to process contactless payments, businesses also need to have a merchant account. A merchant account is a special account through a merchant processing service provider. This account enables a business to accept credit card and debit card payments.

If a business is processing payments online or through a mobile app, the business may also need to obtain a payment gateway. A payment gateway is a secure virtual terminal used for payment processing of credit card and debit card payments paid virtually by consumers.

What Are Some Benefits of Encouraging Customers to Use Contactless Payment Options?

Since contactless payments are not going away, businesses will want to encourage customers to start using contactless payment options more frequently. One way to do this is to share the benefits of contactless payments with your customers, such as:

  • Improved Security and Safety – Contactless payments keep customers’ payment data and personal information more secure and safer compared to inserting a card or swiping it. Furthermore, contactless payments never transmit card numbers or personal information about the cardholder, making it more difficult to obtain card data fraudulently.
  • Mobile Wallet Payments Offer the Best Security – Mobile devices add another layer of security and encryption to contactless payments over “tap and go” cards. The user needs to enter a passcode, fingerprint, or facial recognition so the payment can process.
  • Using Contactless Payments Speeds Up the Checkout Process – There is no need to enter a pin, provide an electronic signature, or push buttons on a credit card processing terminal when using contactless payment options.
  • Contactless Payments Reduce the Spread of Germs – Since customers never have to touch the credit card terminal, they do not have to worry about germs that are on the credit card machine. Plus, contactless payments are more sanitary than traditional payment methods.

How Does Payment Processing Work with Contactless Payments?

Payment processing is similar to making payments by reading the chip or swiping the credit card or debit card. The credit card terminal connects to obtain authorization for the payment. If the payment is authorized, the transaction is completed. If the payment is denied, you are alerted through your terminal, so you can request a different contactless payment from the customer.

How to Entice Customers to Use Contactless Payment Options

A customer making a contactless purchase through her smartphone.

Another great way to entice customers to use contactless payment options is to tie your customer rewards program, digital coupons, and loyalty cards to contactless payments. These types of features can be enabled in various ways.

For example, you could use your store’s mobile app to make these new features available with a special barcode that can be scanned or even a QR Code. Some stores have enabled their loyalty cards so they can be added to mobile wallets and scanned with a barcode reader.

Other businesses have allowed customers to tie a specific payment card to their store account, so, essentially, once they use that credit card or debit card to pay for goods or services, any rewards, coupons, or other loyalty program benefits are automatically rewarded.

Thanks to contactless credit card technology, contactless payments will continue to evolve. To remain competitive, you will want to upgrade your payment processing to contactless payment options if you have not yet done so.

In the coming years, more and more people will want to pay using their smartphone and smartwatch wallets and not have to rely on physical credit cards and debit cards. The sooner you upgrade your payment processing technology and equipment, the better.

For more information about contactless credit card technology, equipment, opening a merchant account, and related merchant services, please feel free to contact Adept Payments at 888-732-3838 today! We would be happy to discuss your needs and develop a customized solution that best represents your business needs and objectives.

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