Advantages & Disadvantages of Contactless Payment (2024)

Contactless cards are great facilitators for your everyday purchases and are fast being adopted by both consumers and businesses. You can swipe your card or digital device at the point of sale to complete your payment.

So,it is time to abandon traditional payment device, for example , and go for contactless options? If so, what should we keep in mind when transacting using such options? Listed below are some pros and cons of this payment system, which will help you make an informed decision.

Advantages of Contactless Payment

Contactless payment offers significant advantages to both consumers and businesses. Here is a list of the pros of contactless payment from both perspectives.

From the Consumer’s perspective

• Ease of use
  Quicker transactions and shorter queues at the checkout are the most significant advantages of contactless payment. Handling cash is not a concern at the checkout. You also don’t have the hassle of punching in your PIN.
• Safer transactions
  Tap-to-pay technology is more reliable and secure than other forms of payment. The chip technology protects you against any fraudulent purchases through encryption and dynamic data technologies.

• The flexibility of payment devices
  Say goodbye to bulky wallets once you go cashless. Your NFC-enabled smartphone is all you need to make your payments.
• Loyalty benefits
  Most loyalty programs offered by stores are in sync with the tap-to-pay smartphone that you use for payments. They automatically confer discounts and loyalty points at the time of payment. Some banks also offer cashback and incentives when you use the contactless payment feature.

From the Business’s perspective

• Better operational efficiency
  Adopting tap-to-pay technology is faster, with lesser workforce requirements. Contactless payments reduce the time that businesses spend on operating card machines or counting cash.
• Better customer experience
  Studies have shown that businesses offering contactless payment facilities provide a smoother and quicker checkout experience to the customers, hence earning their loyalty. Stores can also optimise their loyalty programs and improve customer relationships.
• No extra cost
  Providing a contactless payment facility does not attract any additional processing fee. Businesses pay the same fee applicable for a transaction with a regular credit card.
• Fraud protection
  Contactless payment technology is secure and encrypted to discourage any hacking attempts. Better transaction security means that businesses get their money without any disputes . Besides, contactless payments are protected against fraud by most issuing banks.

Challenges of Contactless Payments

Despite its many advantages, the contactless payment system has its fair share of concerns. Modern technology has managed to address these issues effectively, but let’s go ahead and evaluate some of these concerns about the contactless payment system.

Concerns for Consumers

• Limited acceptance
  Retailers are slowly facilitating contactless payments, but the consumers continue to remain dissatisfied with the spotty coverage, especially among the independent retailers. However, there is an uptick in the last couple of years.
  
  
• Low transaction limit
  As per RBI ruling, contactless payments carry a capping limit of INR 5000* per contactless transaction in India. For higher value transactions, entering a PIN becomes necessary to protect against fraud. Some of the consumers may find this rule to hinder their overall shopping experience.
  
• Technical limitations
  Consumers face certain technical barriers in case of mobile contactless payments. The mobile tap-to-pay system needs you to have an NFC compliant smartphone.
• Limited international availability
  Mobile Contactless payment devices may not work internationally. Despite similar technology, some mobile wallets used for contactless payments do not get accepted abroad. You may also incur an additional foreign transaction fee.
• Security concerns
  Since the transaction with a contactless card does not need any PIN authorisation, there is a fear of fraudulent purchases in the event of it being lost or stolen . In such a case, it is always a good idea to let the issuing bank know about this. Most banks give you a 100% fraud guarantee, relieving you of any responsibility, provided you were careful with its use.

Concerns for Businesses

• Security concerned customers
  Despite being backed by a robust fraud detection system and multi-layered security, customers are still wary of using a contactless payment facility. This cautious mindset can be a deterrent to businesses adopting and facilitating tap-to-pay payments.

American Express® Contactless Cards

Whether it is a convenience of use or the speed of transactions, contactless payment is slowly carving out a place for itself. Amongst millennials, the trend of using contactless-enabled cards and phones is intensifying. Companies are embracing this new technology to not only empower their customers but also to invest in the future of business.

Whether you are a business or a customer, American Express Contactless Cards help you embrace the benefits of contactless payment technology. They come with the dual interface - contactless payment technology as well as the regular Chip and PIN. Accepted worldwide, your Amex Contactless Cards carry a 100% Fraud Protection Guarantee.