How does contactless payment work?

Contactless payments are becoming more popular with each passing year.  

With card payment services now being the expected payment option for customers, it’s important that your business has a seamless system in place to keep transactions moving and queues light. 

But, exactly how does contactless payment work? 

In this guide, you’ll learn: 

● What contactless payments are 

● How to know if your card is contactless 

● How contactless card readers work 

● Common reasons for contactless payments being rejected 

● Debit and credit limits on contactless transactions 

Right then, let’s begin. 

Contactless payment is an in-store payment option that lets customers purchase products with a quick tap of their card or smartphone. It’s a secure, faster alternative to using a Chip & PIN reader as you don’t have to input your PIN to authorise the transaction. 

With contactless being so accessible, there is a limit on spend to help minimise damage - for example, should a customer’s card have been stolen. In the UK, the limit for a single contactless card transaction is set at £100 (as of May 2024). But more on this below. 

Today, most new cards are issued with contactless functionality. However, if you’re unsure or have an older card you’ve yet to test, you should check to see if it has a WiFi symbol on it. 

If you see the symbol below then the card can be used for contactless payments. 

Contactless payments require both a card and payment terminal that have contactless functionality.  

See the WiFi symbol on both? Okay, great.  

 Here’s how it works: 

1) The cashier initiates payment by entering the total purchase amount into the payment terminal. 

2) The customer taps their card or smartphone within a few centimetres of the card reader. They will not need to input their PIN. 

3) The terminal communicates with the card or smartphone using short-range wireless technology. For contactless cards, it uses radio frequency identification (RFID); for mobile payments, near-field communication (NFC). 

4) The terminal checks that the card is valid and the customer has enough funds. How long does contactless take to process? Mere seconds. 

5) If nothing seems suspicious and the customer has the required funds, the payment is approved. You'll usually hear a beeping sound, see a green light, or get a message on the card reader itself confirming the transaction has gone through. 

6) The customer will either get a printed or digital receipt or a printed one depending on your setup. 

7) And voila! The transaction is complete, and the money will arrive in your business bank account once the settlement period clears. 

If the contactless card payment is declining, there could be several reasons for this: 

● The purchase exceeds the daily limit 

● The card machine is down or not set up properly 

● The customer does not have enough funds 

● The card has expired or is damaged 

● The card reader needs a system update 

If the customer knows that they do have the correct funds but it’s still not working, they can always try inserting the card into the Chip & PIN instead.  

For security reasons, contactless payments will sometimes be rejected if the activity is deemed suspicious (for example, say the customer is attempting to use their card in a location they’ve previously never been to). 

In the UK, the limit for a single contactless card transaction is set at £100 (as of May 2024). Anything over, and you’ll have to insert your card into the Chip & PIN. 

For mobile transactions like Apple Pay and Google Pay, there is currently no upper limit. It’s important to note, however, that the retailer or card issuer may issue their own limit to comply with their own security and consumer policies.