What are Contactless Payments and How Do They Work?

Contactless payments are quickly becoming one of the most popular in-person payment methods in retail. This surge in popularity is not just due to its speed and convenience—it’s also one of the most secure ways to pay.

In a bid to stay competitive with clients who are more tech-savvy and have higher expectations than ever, an increasing number of accountants are tailoring their business to be more client-centric—that includes adopting payment methods that meet client expectations.

However, adopting the latest popular trends and innovations is not always simple in the accounting world. As with anything related to payments, accounting firms have to exercise caution with how payments are processed and whether their processes adhere to rules and regulations.

In this post, we will explain everything your accounting firm needs to know about in-person contactless payments.

Key Takeaways:

• How the various types of contactless payments work
• The history of contactless payments and how they’re used now
• How contactless payments stay secure
• The benefits of adopting contactless pay at your accounting firm

What are contactless payments?

In-person contactless payments refer to payment methods where a person physically places their device on a point of sale (POS) system or other compatible device to make a payment. Devices that are compatible with contactless payment typically use the EMV contactless symbol.

Unlike a chip-and-pin card or a credit card swipe, a tap-to-pay card doesn’t have to be inserted into a device, and a PIN number or signature is not typically required.

Contactless payment also extends outside of contactless cards alone. The most popular forms of contactless payment include:

• Tap-to-pay debit/credit cards: Credit cards with the contactless pay symbol can be tapped on a compatible card reader to transmit payment information wirelessly.
• Smartphone apps: Many payment apps such as Venmo or Cash App support contactless payments.
• Digital wallets: Digital wallets are a form of smartphone app that is meant to replace a physical wallet, storing information on your ID, membership cards, and credit cards. These apps include the ability to process contactless payments using the stored card information.

How Does NFC Work

Near field communication (NFC) is a wireless technology that transmits information securely between two devices over a very short range (within about 4 inches). This also differs from the chip in a chip-and-pin card where the chip has to make physical contact with a compatible reader to complete a payment.

Unlike radio-frequency identification (RFID), which is what NFC is based on, NFC allows for two-way communication but only over a short range making it ideal for powering secure contactless payments.

Here’s a simplified overview of how a contactless transaction works:

1. You are prompted to make a payment by a merchant.
2. You use a tap credit card or other contactless payment card and place it on (or near) a contactless POS system or compatible reader.
3. Your payment information (card number, amount, bank details, etc.) is encrypted and sent to the reader.
4. From there, the reader transmits the encrypted information to your bank.
5. Once the payment is approved, the transaction is completed.

A Brief History of Contactless Payments

RFID tags have been in use for a long time, dating back all the way back to World War II. It was not until the 1970s that the technology started to be slowly adopted into the retail world. RFID tags still exist today in passports, tags to track the supply chain, and even in pet microchips.

The first contactless cards didn’t arrive until 1995 in South Korea and were used in the public transportation system. Contactless technology wasn’t used for payments similarly to today until the mid-2000s. The first tap credit cards appeared in the UK in 2007, and a small number of retailers began to adopt contactless payment technology shortly thereafter.

Some of the most significant moves in the contactless payment world came in 2011 and 2014 when Google Wallet and Apple Pay launched, respectively. The creation of Apple Pay vastly increased the demand for contactless payments, in particular.

Contactless payments were heavily adopted during the global pandemic, with many banks even increasing or removing the limits on contactless transactions.

What is the difference between contactless payments and tap to pay?

In most cases, the terms “contactless payments” and “tap to pay” are interchangeable. Both refer to a method of payment that allows you to hover your payment method over a reader to make a transaction, especially in an in-person setting.

However, while all tap to pay transactions are contactless, not all contactless payments are tap- -to-pay, technically speaking. Paying via an app or a QR code that leads you to a payment portal is also a form of contactless payment.

Contactless Payments Security

Contactless payments are convenient and popular—but are they secure? The short answer is yes. In fact, despite the common misconception that contactless payments are somehow less secure than other in-person payment methods, they’re actually one of the most secure payment methods out there.

Accounting firms are increasingly worried about keeping client data secure, and contactless payments have multiple methods of doing this:

• Short range: Contactless cards work over an extremely short range, meaning the chances of someone intercepting card data via short-range card skimming are practically zero.
• Impossible to copy: It’s impossible to clone a contactless payment card due to the specific information encoded on the physical device.
• Large transactions still require authentication: While a card reader can be tapped without a signature for small purchases, most banks require a signature or some form of identification for large transactions.
• Data is encrypted: All data traveling back and forth between the card and the card reader is encrypted, and security standards continue to get more sophisticated.

Combined, these security features make contactless payments a safe addition to other credit card payment methods for in-person client payments.

How do accounting firms benefit from contactless payments?

Despite the rising popularity of remote firms and online web portals, a lot of accounting work is still done in person. For firms that operate both on the web and in person, a smooth client experience shouldn’t be limited to your online offerings alone.

Contactless payments allow you to offer a modern, convenient client experience without sacrificing security. Adopting contactless payments also has some distinct benefits for accounting firms:

Improves Firm Efficiency

Contactless payments are popular for a reason. They are quick secure, and easily completed. Additionally, the more ways you can offer clients to pay, the more likely you are to get paid on time.

As check usage continues to sharply decline, having up-to-date payment methods is increasingly important to processing payments for accounting services promptly. You can also integrate contactless payments with your accounting payment solution to use contactless payment methods for flexible payment terms, retainers, and other specific functions.

Improves Client Experience

When your in-person payment options are limited, it adds friction to the client experience—and added friction means slower payments. Contactless payments make paying for accounting services more streamlined for you and your clients.

The popularity of contactless payments in the retail space also elevates the payment experience to meet clients expectations. Only offering outdated payment methods might hinder your firm’s growth. If your business only accepts checks and cash orders, it’s harder to keep up with the competition.

The technology a firm uses doesn’t equal expertise, but it could impact how potential clients see you, not to mention adding more work for you and your staff. Over half of America regularly uses a digital wallet, so make sure your firm is ready for them.

Enhanced Safety and Security

Contactless payments are incredibly secure, encrypting all sensitive client information with every transaction. Like credit card payments, payment processors for contactless payments must be PCI-DSS compliant.

Using a contactless payment provider that is designed for accounting firms further reduces your risk by ensuring IOLTA compliance and including other client information safeguards.

Offer Contactless Payments with CPACharge

Contactless payment is increasingly popular and here to stay. However, while many accounting firms want to add tap to pay and other contactless payment methods to their firm, the biggest question is how.

CPACharge was specifically built to offer modern payments while navigating the complexities of accounting compliance standards and requirements. With CPACharge, your firm can seamlessly offer in-person contactless payment terminals, QR codes, and mobile app payments without sacrificing data security.

Speak to one of our experts today to learn how CPACharge can modernize your accounting firm.