Contactless payment: what you need to know
What is contactless payment?
Contactless payment is any payment that occurs without a buyer inserting a payment card into a point-of-sale terminal. The term “contactless” generally refers to “tap-and-go” payments.
What are contactless payment methods?
EMV chip cards
“EMV” stands for “Europay, Mastercard and Visa” — the companies that created the technical standard for contactless payment technology.
Whereas traditional debit and credit cards have a magnetic strip that contains a user’s bank account information, EMV cards have a chip that generates a unique code for every payment.
Apple Pay Australia, PayPal and Google Wallet are all types of digital wallets — applications that securely store a user’s payment information.
Once you’ve stored your information in a digital wallet, you can use your smartphone or smartwatch to make purchases.
Some types of digital wallet applications include features beyond payments. The Opal Travel app, for example, lets users plan trips and see their travel history, in addition to paying travel fare.
Digital wallets may also store event tickets, discount codes and digital proof of identity.
There are 3 types of digital wallets:
A closed wallet — like Amazon Pay — allows transactions only with the issuer, and any refunds automatically appear in the wallet.
A semi-closed wallet allows customers to pay merchants who have a contract with the issuer. Payment processing companies Square and Stripe are both semi-closed wallets.
PayPal Australia is an example of an open wallet. Anyone with a PayPal account can use it to exchange funds, so it’s not just for retail purchases.
Why should businesses allow contactless payment?
Card skimming, which is the act of placing a small, illegal card reader at POS terminals or ATMs, accounted for $5.5 million AUD in losses in 2022.
The magnetised strip on debit and credit cards contains static data about the user’s bank account, and skimmers allow criminals to access that information. Contactless payments are much more secure because they don’t reveal bank account data.
Businesses that accept contactless payments can help shield customers from skimming fraud.
According to the Reserve Bank of Australia, mobile wallets accounted for 25% of all debit and credit card transactions in 2022. And 38% of Australians made purchases using their smartphone or smartwatch in 2022, up from 19% in 2019.
Given the growth of mobile wallet usage, businesses should enable contactless payments to improve customer satisfaction.
With digital wallet adoption increasing, more brands are expanding their marketing efforts to include wallets.
For example, brands can boost sales and upsells by creating special discounts just for wallet users. Some brands are also developing their own closed wallets that allow customers to earn points or rewards with each purchase.
Importantly, businesses often get payments faster if they offer a digital wallet payment option.
With payment information already loaded into the digital wallet, customers can make payments at the double-click of a button rather than having the hassle of inputting their credit or debit card details.
During the pandemic, the demand for contactless payment skyrocketed, because handling cash and manually using EFTPOS machines posed a risk of infection for workers and customers.
Safety-conscious habits that arose during the pandemic made a lasting impression on how people shop and the payment methods they prefer.
Enabling contactless payment can help keep workers and improve customer satisfaction.
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