Gone are the days when people only had cash as a payment option available to them. Both consumers and businesses are now open to the idea of sending and receiving money digitally. A global study shows that nearly eight out of every ten payment transactions are now contactless. The global contactless payment market size is projected to reach the mark of $5,424 billion by 2027 while growing at a CAGR of 20.6% during 2020-2027.
While all the statistical information paints a bright picture about the present and future of payments, it is equally important for us to understand the fundamentals of contactless payments. Let’s start from the basics.
What is a contactless payment?
As the name suggests, contactless payments refer to a mode of payment that allows consumers to pay for goods and services using a debit or credit card, smart cards, or through payment devices using NFC (Near Field Communication) or RFID (Radio Frequency Identification) technology. They also cover the payments that are transferred using mobile applications meant for secure payments.
With the evolution of the payment landscape in India, most businesses now have POS terminals and QR codes available easily to benefit from contactless payments.
How do contactless payments work?
Currently, contactless payments are based on NFC technology, which is an upgraded version of RFID. They generally require the reader/POS terminal and consumer’s payment device to be in close proximity for successful transactions. The waves from the NFC-enabled devices exchange encrypted payment information, which is then used to enable fast and secure transactions.
Merchants who accept contactless payments prompt the customers to pay via their POS devices. When the intrinsic payment system accepts the tap or swipe, it signals the merchant with a positive transaction sign. The transaction is completed once they receive approval from the underlying bank.
Advantages of contactless payments
Higher speed of handling transactions
With lesser handling of cash and the involvement of advanced payment technology, contactless transactions are completed at a faster rate. It further helps reduce the queues that are likely to build up for cash payments at the merchants’ side.
Enhanced security
Contactless payments are also backed by anti-fraud technology that helps prevent fraudulent transactions. With the rising cases of fraud and cyber theft, higher security of these transactions acts as a great relief for the end-users. They can also define contactless payment limits on their cards to prevent facing major losses resulting from payment fraud.
- Better customer experience
As a result of faster, more secure contactless transactions, merchants witness an increase in sales and a reduction in cart abandonment rate.
Also, the average order value automatically increases when customers do not face the constraint of handling cash.
Recommended Read: Average Order Value – Why It Matters for Your Business?
Adoption and usage of contactless payments
From increasing preference being given to digital payments to the significant rise of contactless transactions, both businesses and consumers relish the result. While physical distancing has become an urgent need, user behavior has shifted contactless payment modes.
As per the NPCI report on digital payment adoption, 1/3rd of Indian households use digital payments in some form. It is also interesting to note that a quarter of the households in the bottom income group also use digital payments. 79% of the households in different income groups covered in the report use apps like Paytm for contactless payments.
Example of contactless payments
It is largely believed that contactless payments are available through banks and financial institutions. However, Paytm, as the leading payment solution provider in India, also has its own offerings supporting contactless transactions.
What do you need to start accepting contactless payments?
First and foremost, you, as a business owner, need to reduce the dependence on cash transactions. To enable your customers to pay you online, you can switch to Paytm for Business to enable contactless payments using:
- Paytm Wallet
- All-In-One QR
- Dynamic QR
- Paytm POS
- Paytm Payment Gateway
- Paytm Payment Links
