Contactless Payment – A Hit or A Miss!!!
Step in -> Tap / Wave ->Payment done ->Go!
The advent of cutting-edge technology has brought huge changes to the card payment systems. An example of this is the contactless payment systems that have come up with the help of contactless cards, mobile phones, payment wrist bands etc. Contactless systems or mobile tap-to-pay systems securely store credit and debit card information, which can be used by consumers to pay for purchases by just tapping their devices in front of radio frequency readers at the payment counters of stores. Contactless payment systems also allow customers to make online purchases from their mobile and PCs.
The technology behind contactless payments is NFC or Near-Field-Communication technology. NFC utilizes short-range radio signals which work in a range of around 20 centimeters but are effective in a range of 4 centimeters. NFC technology can only be used with special tools called NFC readers, which are compact devices used by merchants to accept payment from customers’ contactless payment devices.
Mobile tap-to-pay systems do not act like bank accounts. They don’t have the ability to hold cash balances but can be paired with digital wallets for this purpose. The only function of such systems is to securely store your credit or debit card details. You can add as many cards as you like once the payment system app is downloaded.
After knowing what contactless payment is, let us look at whether this technology will gain success or not.
Here are the reasons why it is gaining traction among people today:
1. No more need for plastic cards or wallets: The only component required for contactless payment systems to work effectively is an NFC-enabled device. That means you will carry your digital wallet with you wherever you go without actually carrying a physical wallet. If you are going to purchase from a store that you know has the facility for contactless payment, you can simply take your phone and leave everything else at home. With no more plastic cards, the risk of losing or misplacing the cards is also substantially reduced. Also, you no longer have to carry around bulky wallets filled with cards whenever you go to make a purchase at your neighborhood store.
2. No additional fees: Merchants who accept contactless payment can rid of the extra fees they pay to third-party payment services. They will instead pay the same credit/debit transaction fees which are usually between 2% to 3%. Therefore, merchants will have all the reasons to accept contactless payments.
3. Faster: In some situations, contactless payment systems save a huge amount of time. This is mainly because the system of tapping your payment instrument in front of the reader one time is much more convenient and handy as compared to using clunky card readers and paying by physical cash. This system can save a lot of time at gas stations, vending machines, transportation ticket kiosks, and so on.
4. Security: The biggest advantage of contactless payment is that the card or digital payment instrument is never handed over to the merchant & is always in possession of the cardholder. Thus, reducing the chances of card fraud by way of cloning or other fraudulent methods. Also, the exposure is limited to the set floor limit
There is always a flipside to everything like a coin. Take a look at some of the challenges that we face today for of contactless payments:
1. Inconsistent acceptance by merchants: It has taken a long time for merchants to accept contactless payment methods for their stores. So even if you are an early user of the contactless payment methodology, you will find very few stores that support the technology. This is very frustrating for users since they have to use alternate forms of payment even though they have the ability to use contactless payment.
2. Lack of technical knowledge among merchants: With very few merchant patrons of contactless payment technology at the moment, it is obvious that not many merchants would know the troubleshooting required to be done in case of any hardware failure or system functionality issue. Even simple issues such as lack of an internet connection are enough to befuddle them, and technical support needs to be brought in from the experts.
3. Limited international payment acceptability: Even though NFC standards are almost the same everywhere, there are limited areas overseas where your contactless payment method would work, even though the merchant accepts contactless payment from local users. This challenge has its roots in foreign transaction fees and the limitation of the technology at the moment. Since the transaction fees would vary for every place you visit, it might be required to carry alternate methods of payment. Therefore, while traveling overseas it is always a better option to carry your cash and cards with you.
All in all, we can definitely say that contactless payments are here to stay. With slight modifications to their existing technology, the above challenges could be addressed and turned into benefits of using the technology. Even though contactless payments are a novice in the market, we can definitely see a future where they would play a predominant part in changing the entire payment system.