March 28, 2023 By Max Freedman

Contactless payments provide shoppers with a faster, easier checkout experience. But some small business owners – maybe including you – are skeptical about making the transition. Maybe you don’t fully understand or trust this new technology, but there’s information available to you. Below, find more information to help address the question of how contactless payment works – and tips to help make the transition yourself.

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What is contactless payment?

Contactless payment methods use tap-and-go contactless technology instead of physical bills or card swiping. Unlike standard credit or debit cards, there’s typically no need to enter a PIN thanks to proximity-based sensors that automatically read your card information, so long as the contactless feature is enabled on the card.  

Types of small business payment methods

Below are some of the most common payment methods that small businesses typically accept. You may use these methods to make your own purchases too. 

  • Cash payments. Cash payments are exactly what you think. They’re when customers use bills and coins to purchase their goods or services. 
  • Check payments. Checks are signed documents that authorize your business's bank to transfer money from the customer's account to yours. They’re most often used for larger transactions. 
  • Card payments. Credit and debit cards are the most commonly used payment methods in the United States given their convenience. Card payments are typically able to deposit money into your business account faster than making the time for a trip to the bank. That, in turn, can improve your cash flow management
  • Online payments. Online payments are electronic fund transfers through payment gateways. They include website-based payments through credit cards, debit cards, and eCheck for online and brick-and-mortar businesses. 
  • Mobile payments. Mobile payments are made through smartphone apps. Near-field communication (NFC) technology, digital wallets, Apple® Pay, and Google® Pay are common examples. 

How does contactless payment work

If you’re hesitant to trust contactless payment, then knowing how it works might help you decide whether to make the transition. As explained below, contactless payment is generally a five-step process. 

Step 1: The customer is prompted to make a payment

After you ring up the customer’s products, the screen will prompt them to complete the transaction using their preferred payment method. To pick contactless payment, they’ll select the contactless symbol (four curved, expanding lines) and wait for the screen to change.

Step 2: The customer holds their card over the card reader

The system will prompt your customer to hold their card over the contactless symbol. Typically, they’ll only need to do so for one to two seconds before the terminal reads the card with Radio Frequency Identification (RFID) technology.

Step 3: The payment terminal transfers the card information 

While holding their card over the payment terminal, the customer’s card uses electromagnetic waves to share information and then communicate with their bank account.

Step 4: Bank authorization

Depending on the available funds in the customer's account, their bank will either authorize or deny the transaction. Authorization allows your business bank to transfer the money from the customer's account to your businesses. 

Step 5: Purchase confirmation

The payment terminal confirms that the transaction was successful with a noise, green light, or check mark. From there, the customer can put their card away and leave with their receipt and purchase. 

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Advantages of contactless payment

Contactless payments generally offer several notable advantages for a business. 


Using a contactless payment method at the point of sale (POS) only takes about 15 seconds from the start of the transaction to the end. A lack of physical bills to handle or PINs to enter typically means much faster transactions overall. This way, one employee may be able to tend to more customers within a given period.

Safer transactions

Contactless payments are typically among the safest payment methods available. Their comprehensive encryptions and authentication protocols generally provide extra protection for every transaction, safeguarding the customer's financial information. 

Easy to use

Contactless payment terminals may provide even more convenience to you and your customers with NFC technology. The NFC component lets the terminal connect to cards and communicate with other payment methods like electronic watches and rings. With these devices, the customer can just tap and go. 

No additional cost

Installing a contactless payment system typically comes at no additional cost if you already have contactless-enabled machines. Similarly, you’ll pay the same credit card processing rates with contactless transactions as you would with standard card payments.

Better customer experience

A faster and more convenient payment method generally means customers will spend less time in line to check out. Faster transactions may mean fewer abandoned sales, a better customer experience, and increased brand loyalty. 

Disadvantages of contactless payment

Before adopting contactless technology, it’s important to understand the disadvantages. 

Not enough acceptance

While contactless payment does offer a more convenient customer experience, some consumers haven’t gotten behind it yet. But as long as your customers know you accept other payment methods, you’re typically not losing sales by failing to implement contactless payment.

Security concerns

While contactless payments include ample protection against digital threats, they don’t prevent a card from getting lost or stolen. The good news is that customers may deactivate their cards remotely.

How to implement contactless payment options

Here are some tips for seamlessly introducing a contactless payment system. 

  • Set up your equipment

The first step is determining whether you need additional technology to allow for contactless transitions. Often, small businesses already have equipment that can read RFID and NFC signals, so you may only need a few additional plug-in readers. If you aren’t already set up for contactless pay, then research and purchase a third-party system. Alternatively, you can work with your POS provider to find a new solution with contactless options.

  • Adapt your business to the new system

Once your contactless payment terminals are set up, run a few tests to ensure they’re working correctly. Then, train your staff on troubleshooting the terminal, accepting payments, and how to work the system. 

  • Inform customers of your new payment method

After you have everything up and running smoothly with adequately trained staff, it’s time to tell your customers about their new payment options. Update your website to inform visitors that you now accept contactless payment, and make sure to place clearly visible signs where customers check out. 

Capitalize on contactless payments with SmartBiz® 

Contactless payments may provide a more rewarding consumer experience. That means you may retain more of your customers and use your increased revenue to grow your business. In fact, business growth often requires additional funding for larger purchases, and SmartBiz may be able to help you get it. Enter your financial information into SmartBiz’s online application and see if you pre-qualify* for SBA loans, traditional bank loans, or custom financing today.

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