Understanding contactless payments for small businesses

Tap and go! Contactless payment with credit card or phone has become the quickest and smoothest way to accept payments – and consumers and businesses are rapidly embracing the method. For small business owners, deploying the latest payment technologies can help them deliver greater customer satisfaction while achieving productivity and efficiency gains.

In this article we review the ways that contactless payments can streamline transactions and elevate consumer experience. We also highlight some potential downsides of this latest payment method.

This short but useful guide will equip American business owners, entrepreneurs, managers, and decision-makers with insights into integrating contactless payments into their operations. It will also provide tips on how to achieve heightened efficiency through delivering enhanced customer service.

The basics of contactless payments

Contactless payments have revolutionized the way businesses handle transactions. They have achieved this by offering a seamless and secure payment method that modernizes the payment process.

Defining contactless payments for business

Contactless payments, often characterized by the tap-and-go method, involve using contactless-enabled cards or devices to make secure transactions swiftly. According to statistics conducted on cross-border e-commerce, Americans are using them in ever greater numbers with $199bn in contactless payments expected in 2023, more than double the total in 2020¹.

They use technology like NFC (Near Field Communication) or RFID (Radio-Frequency Identification) to enable payments to occur when the card or device is near a compatible terminal, but with sophisticated security to ensure safe transactions.

This frictionless process expedites transactions for both consumer and business.

Contactless cards operate via technology embedded within a card or device. When near a compatible terminal, a connection is transmitted. This sends encrypted payment information securely by ensuring that the transaction details remain protected during the brief data exchange. Such robust security measures reassure businesses and customers of the safety of contactless payments.

For a more detailed look at how contactless payments work and their security measures, there is an in-depth review for business owners available in our resource center.

The difference between contactless and mobile payments

While contactless payments rely upon a card or device being held in proximity to a terminal, mobile payments, also known as peer-to-peer payments, rely on smartphone apps or dedicated platforms. Such payments usually involve transferring funds directly between individuals or businesses, that can be facilitated by apps like PayPal. These transactions can occur remotely by a seamless digital transfer process that is not reliant on the physical proximity that contactless payments require.

How to accept contactless payments

Before adopting contactless payments, small businesses should understand how to set up point-of-sale (POS) systems for this payment type. They should also review the advantages and challenges involved.

Setting up a point-of-sale (POS) system for contactless payments

Integrating contactless payments into existing POS systems requires compatible hardware and software.

Fortunately, most modern POS systems offer contactless payment functionalities. It is also quite straight-forward to procure or hire NFC-enabled terminals and other devices that allow seamless, contactless transactions.

Once the required tech is in place, businesses will need to ensure staff are trained to guide customers through the payment process.

Benefits of contactless payments for business

The adoption of contactless payments brings numerous advantages for small businesses. Beyond the enhanced customer experience that quick and convenient transactions deliver there are also significant gains in relation to improved customer retention.

Businesses can integrate loyalty programs into their contactless payment system. Such incentives and rewards encourage repeat purchases, higher basket value and create a bond between business and customer.

Disadvantages of contactless payments for businesses

Concerns about contactless payment security are often raised. However, the systems used have robust encryption and tokenization methods that safeguard sensitive transaction data, for both customers and businesses.

Such concerns can be reduced through transparent communication in-store that emphasizes the security measures that are in place.

In addition to security concerns, another challenge that businesses encounter is the need to ensure that all their POS systems are updated and compatible with contactless technology. Navigating such potential technical glitches during the implementation of contactless payments is something businesses must therefore consider.

Contactless payments trends

Contactless payments continue to evolve and, as technology advances, contactless payments are expected to become even more widespread.

Emerging trends include wearables, such as watches, equipped with payment capabilities and the use of biometric authentication (such as fingerprint or facial recognition).

These innovations will continue to reshape the way transactions are made. For small businesses, adopting best practices in contactless payments is crucial to meeting customer expectations.

Additional ways in which the payment process can be simplified include integrating contactless payment options on invoices, providing online payment portals, and integrating payment capabilities into mobile apps. These all create an environment in which making payments is more accessible and caters to different customer preferences.

As we move towards a cashless business operation, it is important to remain aware that the streamlined transactions and reduced security risk (compared to handling cash) must be weighed against a customer base that may still prefer to use cash or do not have the required tech know-how to make digital payments.

Contactless payment options for small businesses

As contactless payments continue to proliferate and diversify, small businesses can realize streamlined operations and deliver a better customer experience at the point of purchase.

It is anticipated that the number of ways that contactless payments can be used will continue to increase.

To find out how PayPal can make accepting payments simpler for small businesses, visit the resources here.