Guide: Contactless Payments and how is it Transforming the Future of Retail

The 'low touch' contactless payment mode surged during the pandemic. Since then, its growing popularity has increased worldwide, including in the UAE.

Statista mentions that the total transaction value in the digital payments market is projected to reach US$29.75bn in 2024 in the UAE. Seeing its growth, it can be said safely that contactless payments are here to stay and will rule the market in the coming years.

This article will show how contactless payments shape the retail industry.

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What are contactless payments

Contactless payment is a modern method in which customers don't need cash or a swipe card. Instead, they can tap or wave their card in front of an e-card reader or use a digital payment wallet on their smartphones to make a payment.

To make this innovative payment solution successful, complex technologies like Radio Frequency Identification (RFID) and near-field communication (NFC) exchange information between your card or phone app, bank account, and the merchant's reader.

As this data can only be exchanged within a range of around 4 cm, there is no scope for accidental reading by unauthorized nearby card readers.

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What are the benefits for consumers and retailers

Contactless payments are fast and reliable. This benefits both consumers and retailers in the following ways: 

Benefits of contactless payments for retailers

1. Better operational efficiency: The tap-to-pay feature is fast and efficient and doesn't require an additional workforce. It reduces the time the retailer would have spent counting cash or swiping the card in the machine.

2. Improved customer experience: With tap-to-pay, consumers no longer need to wait in long queues. They can simply tap and pay and complete a transaction. When retailers achieve such operational efficiencies, customers have a smoother shopping experience, improving overall customer satisfaction.

For example, by integrating PayBy into your payment solution, you can offer multiple contactless payment options like an online payment gateway, QR code payments, or a pay link that customers can access from their smartphones.

3. Increased sales: When you offer the convenience of contactless payment and a smooth shopping experience, customers are more likely to buy from you. This can improve overall sales.

4. No extra cost: Providing a contactless payment option doesn't require any extra processing charges. Additionally, it reduces operational costs, as you can reduce the risk and cost of an extra workforce for cash handling and processing.

5. Fraud protection: Contactless payments use complex technologies like encryption and tokenization to prevent hacking and fraud. A better security system ensures no fraud chargebacks, which are more common with magnetic swipe cards.

6. Improved efficiency: As contactless payment can streamline the entire payment process, your staff can focus on other tasks, thus improving overall operational efficiency.

7. Access to data: Contactless payment systems are often integrated with different digital payment platforms. This gives retailers easy access to customers' financial behavior and preferences, which can help them make data-driven business decisions.

8. Build customer loyalty: Tech-savvy customers always appreciate businesses that leverage technology and incorporate convenience into their operations. By implementing a contactless payment processing system, you can nurture the emotions of tech-savvy consumers, turning them into loyal customers. 

9. Future-ready: Digital and mobile payment systems are evolving rapidly. Retailers who have already embraced contactless payments are ahead of the curve ready to embrace the new era of digital payment.

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Benefits of contactless payments for consumers

1. It’s fast: Contactless payment is faster than traditional payment methods. Customers find it convenient and fast, especially for small everyday purchases.

2. Easy to use: With contactless payment, customers don't need to remember their PIN or sign a receipt. They just need to tap their card to make a payment. Quite easy, isn't it?

3. Better security: As mentioned, contactless payments use strong security technologies like encryption and tokenization, which reduce the risk of unauthorized access, fraud, and theft.

4. Flexibility of payment: Contactless payment ensures you don't need to carry bulky wallets loaded with cash and numerous cards for your errands. You’re sorted with your payment needs if you have an NFC-enabled smartphone.

5. No more ATM trips: As contactless payments are no cash, you need not make multiple ATM visits. This can subsequently eliminate the risk of loss or theft at ATMs.

6. Rewards and loyalty points: Many banks offer loyalty points, discounts, and cashback offers when you use contactless payments.

7. Better accessibility: Contactless payments are more accessible to consumers with disabilities. Since they require fewer physical interactions, they’re more accessible than traditional payment methods like counting notes or entering a PIN on a device.

8. Budget management: If your contactless payment system is integrated with a digital wallet, you can track all the transactions in real-time. This helps manage your budget and monitor your spending habits.

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Contactless payments - Trends and adoption

As mobile payments and various digital solutions influence customer behavior and payment patterns, the adoption rate for contactless payments is growing among retailers.

In UAE, 49% of small and medium business owners already offer contactless payment options as a growing customer demand. This will only see an uptick in the current months.

Let’s look at some of the recent adoption trends for contactless payment.

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1. Integration with mobile wallets

Mobile or digital wallets allow users to pay through their mobiles or the web. Mobile wallets like Apple Pay, Google Pay, and Samsung Pay have accelerated consumer adoption of contactless payment.

A survey shows that more than half of consumers are still using contactless payment even after the pandemic, indicating it is here to stay.

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2. Not just limited to cards

Contactless technology is not just limited to tap-to-pay. It has a broad scope of expansion beyond cards.

For example, it can be integrated into various payment solutions, including mobile, web, smartwatches, and wearables like fitness trackers and rings, offering more choices to consumers to make payments.

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3. QR code payments

QR code-based contactless payments are gaining traction, particularly in Asia, where NFC infrastructure is yet to be developed. Generating a QR code is easy with platforms like PayBy. All you need to do is create a merchant account, access the QR code generation feature, and you’re ready to accept payments from customers.

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4. Biometric authentication

While customers may have some initial inhibitions about the security aspect of contactless payment, enhanced security features like biometric authentication assure customers.

Customers can conveniently safeguard every transaction through fingerprint scanning, tokenization with biometrics, facial recognition, voice recognition, etc.

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5. Contactless ATMs

Banks are also driving contactless payments by deploying various contactless ATMs. Customers can withdraw cash using cell phones and contactless cards without touching the ATM.

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The future of contactless payments

As new technologies continue to emerge and new security measures come into effect, we can expect to see a greater adoption of contactless payments.

For example, with enhanced security features, future contactless payment systems will have more advanced security measures, and we can expect to see the use of blockchain technology and multi-factor authentication.

As the Internet of Things (IoT) advances, it will play a crucial role in enabling more devices to interconnect for a smoother payment ecosystem.

With the introduction of artificial intelligence and machine learning, we can expect to see more personalized payment experiences. The AI-driven insights will help payment solutions offer more customized products in the coming days.

As customers adopt contactless payments more, customer demand for smoother transactions will rise beyond retail. In the coming days, we can expect more contactless payment usage in healthcare, education, government services, etc.

In the future, contactless payments will see greater adoption as the world shifts towards more sustainable payment solutions that reduce environmental impact.

Contactless payments could also integrate with AR and VR technologies in the future, enabling new and immersive shopping experiences where payments are made seamlessly within virtual environments.

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Get started with contactless payments

No matter how good your products are, how you make shopping a convenient experience for your customers can differentiate you from your competitors.

With solutions like PayBy, you can integrate contactless payments with a virtual account and digital wallet, or a payment gateway, direct pay, QR code payments, etc., and stay on top of the current payment trends.

‍Get started today!