What is a contactless payment?

In this article, we’ll explain what a contactless payment is, how you can accept contactless payments, and why contactless payments are attractive to consumers. We’ll also cover how you can find the best card reader for your business and accept contactless payments by phone.

Payment habits are evolving across the UK. We’ve moved from the days of cash and cheques to the age of credit and debit card payments, and now we’re entering the age of contactless and mobile payments. 

Accepting contactless payments is easier and more accessible than ever, thanks to specialised providers like SumUp. We offer card readers that accept all forms of contactless payment, as well as a larger ecosystem of tools designed to help you run your business on your own terms.

What are contactless payments?

Contactless payments are most commonly made by credit or debit card, using the 'tap to pay' method with compatible card readers. Thanks in part to the fact that the UK contactless limit is now £100, this payment method continues to grow in popularity. According to data from UK Finance, contactless payment accounted for a third of all transactions in the UK in 2021, and 7 out of 10 card payments were contactless.  

The first contactless payment system was launched in the mid-1990s in South Korea. Taking the form of a prepaid contactless card for use on public transport in Seoul, this innovation paved the way for countless imitators around the world, including Transport for London’s hugely successful Oyster Card system.

And it wasn’t just transport networks that quickly came to value the convenience and speed of contactless payment. For example, the technology was also implemented by Mobil in petrol stations in the US, and continues to be offered under the name Speedpass+. 

Pros and cons of contactless payment

For both consumers and businesses, the benefits of contactless payment are numerous. However, that’s not to say that it’s entirely without perceived drawbacks. Since contactless is here to stay, it’s helpful to understand what customers value about it, and why some may still be reluctant to make the switch.

Benefits of contactless payment

• It’s easy. All the customer needs to do is tap their card or smartphone on the contactless reader.

• It’s quick. In most cases, customers don’t even need to enter their PIN, so the whole payment process takes just a few seconds.

• It’s flexible. Did your customer forget their wallet at home? No problem, they can tap to pay with their phone using a contactless payment app.

• It’s safe. NFC chip and mobile wallet technologies are encrypted, and just as secure as chip and PIN payments.  

Drawbacks of contactless payment

• There are contactless payment limits. However, as technology becomes more widespread, those limits are increasing. The UK contactless limit is currently £100. 

• Some customers still have fraud concerns in the absence of PIN authentication, despite the fact that contactless payment fraud is rare. 

So while you may occasionally encounter some reluctance from customers, the pros clearly outweigh the cons when it comes to going contactless.

How contactless payment works

Credit and debit cards that support contactless payment have a contactless symbol that looks like a sideways Wi-Fi symbol, and are ready to use right away. Simply place the card near the card reader – the optimum distance is around 2-4 cm – and the pair will communicate to start the transaction. A contactless payment is approved within seconds, as long as the transaction is validated by the receiving bank.

Contactless payment works thanks to radio frequency identification (RFID) and near-field communication (NFC) technology. The RFID technology is housed in the chip, allowing the card to communicate with another device. NFC refers to the communication protocol used by the card and the reader to communicate and exchange data within seconds.

Choosing the right equipment to receive contactless payments

In the UK, all card readers have been able to accept contactless payments since January 2020. However, a number of businesses are yet to upgrade their hardware. This is often because they want to avoid extra costs from traditional card reader providers, who charge subscription and monthly fees in addition to the cost of their machines.

At SumUp, we take a different approach: you simply buy your card reader and pay a fixed transaction fee every time you successfully receive a payment. This means that you only pay for what you use, with no binding contracts or hidden fees. 

We specialise in payment solutions for businesses, and there’s a card reader for every situation. All our card readers can process contactless payments as soon as they’re set up, and they’re all fully mobile.

Mobile contactless payments thanks to NFC

In addition to credit and debit cards, our card readers accept contactless payment by phone. NFC payments can be made by any device with the capable technology, most commonly smartphones and smartwatches compatible with Apple Pay or Google Pay. According to a 2022 survey, 64% of UK customers prefer making contactless payments by phone because of the added security measures. 

These security measures include encryption and tokenisation. Encryption uses a secret key to make sure private information is only accessible to the parties transacting, and tokenisation encrypts customer data using a randomly generated token. In short, this means your card data is very safe. 

Making phone payments often relies on two-factor authentication (2FA). That means that to complete a transaction, customers have to identify themselves with something else besides their card or smartphone. Common forms of 2FA include facial or fingerprint scans, involving data that is unique to your own body. 

Contactless payment by phone is rapidly shifting consumer behaviour. As with most technological advances, young people are embracing it first – 64% of 18-25 year olds use their phones to make payments, and 48% believe that cash will soon be completely obsolete.

It may seem challenging to keep up with contactless payment technology, but today’s contactless payment machines have risen to meet this demand. SumUp card readers accept all forms of contactless payment, making it easier for you to keep your customers happy.

UK contactless limits

On 15th October 2021, the UK contactless limit was increased from £45 to £100 by HM Treasury and the Financial Conduct Authority. This came after an earlier increase in April 2020 from £30 to £45. As the prices of many consumer goods increase, a higher contactless payment limit allows customers to make key purchases in places like supermarkets and petrol stations more easily.

Thanks to the increased contactless limit, most customers now expect contactless payments to be supported, and it’s easier than ever to oblige them. Allowing customers to pay the way that they want is an excellent way to improve their shopping experience and make them want to return. 

The UK contactless limit is £100 per card purchase, withdaily purchase limits or monthly amounts sometimes imposed by payment regulators. Although this may raise security concerns, the UK Finance organisation assures consumers that they’re fully protected against losses due to card fraud or those linked to card theft. 

As an extra security measure, every card will prompt the card holder to enter their PIN after a certain number of contactless payments, or after spending a certain amount, to confirm that they’re the genuine card holder.

When it comes to contactless payment by phone, this transaction limit doesn’t necessarily apply. Currently, both Apple Pay and Google Pay allow payments above the £100 UK contactless limit. 

Contactless payments in numbers

Today, the tap to pay method is widely used, with contactless payments on track to continue increasing as cash usage declines. From 2020 to early 2022, contactless payments went up by 36%, while cash payments declined by 35% in the same period. According to the UK Payment Markets 2021 report by UK Finance, these dramatic shifts were attributed to an increase in debit card usage and an acceleration in the acceptance of contactless payments, both driven by the Covid pandemic. 

Initial figures for 2022 from the UK Finance organisation indicate that contactless is continuing its fast growth trajectory, with 58% of all payments in the UK made using tap to pay in 2021.

Contactless payments representeda third of all UK transactions in 2021. This includes contactless payment by phone and smartwatch, as well as by debit and credit card. Around 61% of UK consumers have used mobile payments as of 2022.

How SumUp’s product ecosystem can help your business

With all card readers equipped to receive contactless transactions via NFC as of January 2020, every business can benefit from offering this technology to their customers. Now that this tech is standard practice, business owners across the country expect more from their card reader provider.

As an industry leader, we understand the importance of flexibility to a business. All our devices are mobile, allowing you totake payments wherever and whenever you need. 

If you’re at a local farmers market selling fresh produce, you can take payments by connecting to your mobile network or to a stable Wi-Fi connection. If you run a restaurant or café, your staff can bring the mobile card reader directly to the customer’s seat. This can cut down queues at the till.

Our merchants include dog trainers, comic book convention exhibitors and bands selling merchandise on tour. They can all get paid wherever they work thanks to SumUp’s card readers.

Phone payment with Payment Links, QR Codes and SumUp Tap

Signing up with SumUp also gives you the flexibility to accept remote payments by phone using Payment Links or QR Codes. Both are found in the SumUp app and only take a few seconds to create. 

Payment Links allow you to process contactless payments wherever you are and can be sent to customers via SMS, email or social media. Simply enter the amount you’re requesting and you can create a link to a secure payment portal, where your customer can enter their details and complete the transaction. 

Another form of remote phone payment involves QR Codes. You can generate and send these in much the same way as Payment Links, but you can choose whether or not to specify the amount a customer owes. Unlike Payment Links, you can use the same QR Code as many times as you want for an unlimited number of QR Code payments. 

Nowadays, you can even turn your Android phone into a mobile contactless payment machine with SumUp Tap. All you need to do is download our free app and create a SumUp profile. 

Customers can pay by tapping their card or device on the back of your phone. SumUp Tap lets you accept all the same forms of contactless payment as a regular card reader does, for the same low 1.69% transaction fee – all with your existing Android mobile device.

When using SumUp Tap, the UK contactless limit of £100 per transaction applies for card payments. This makes it a great payment solution for businesses that don’t need to process larger payments. 

More than a payment provider

The SumUp ecosystem includes tools for every aspect of your business, from a free Business Account that makes managing your money easier and comes with a complimentary Mastercard to a quick and easy Online Store platform, so you can get started with ecommerce. 

You can access sales reports and transaction data through the free SumUp app, or use SumUp POS if you need more detailed analytics and accounting software. All of these tools were created with the needs of small and growing businesses in mind.