Contactless payment systems consist of credit cards, debit cards, key fobs, smart cards and devices such as smartphones. They utilize radio-frequency identification (RFID) and near field communication (NFC) for ensuring protected payments.
The embedded chip and antenna ensure consumers pass their card in front of a reader during the sales process. Transactions are extremely fast.
Contactless smart cards that operate as stored-value cards are increasingly being used as transit system fare cards (the Oyster card or RioCard).
According to an international market study by Juniper Research, the deal value for online, mobile and contactless is estimated to reach $4.7 trillion by 2019.
At present, contactless payments are witnessing a 200% rise in the UK. NFC contactless payments are broadly estimated to develop robustly.
Apple Pay has been projected as the driving effort in placing contactless in the minds of consumers and vendors. It is a mobile payment and digital wallet offering that allows consumers to facilitate payments using the iPhone 6, 6 Plus and Apple Watch-compatible devices (iPhone 5 and later models), iPad Air 2, iPad Pro and iPad Mini 3.
Contactless payments do not carry any additional fees because they are not very expensive to process for the vendor.
Contactless payments are projected to become mandatory by 2020 and there would be no minimum expenditure on deals.
A number of contactless payments are forecasted to increase nearly nine times to 12.2 billion in 2020.
According to a study by RBR, “we should not be carried away by them just yet as contactless transactions still represent just two percent of the overall volume of card payments in the region and 0.5 percent of their value.”
According to Owen Britton Jennings, Head of Business Intelligence at Square, “More and more people want to pay with contactless and checkout faster. I think the NFC is the future.”
Globally, contactless payments are expected to increase exponentially in the long-term. Retailers must be prepared for the change as increasingly consumers are shifting to contactless payments.
Companies must identify the offerings that would ensure a positive customer experience as they expand and scale transactions.
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