With the growth of mobile wallets, many shoppers are now using contactless payments to purchase items in brick and mortar stores. Contactless payments allow shoppers to hold their mobile device in front of a reader to make a purchase instead of using cash, check, or a credit/debit card. The shopper never has to take out their wallet as their phone is synced to their credit card, adding to convenience during the checkout process.
Contactless payments are possible due to Near-Field Communication (NFC) technology - a method of contactless communication and data exchange between smartphones and terminals. Developed from radio frequency identification (RFID) technology, an NFC chip functions as a segment of a wireless link. Once it is initiated by another chip, being held just a few centimeters from each other, it can transfer small quantities of data among the two without even needing an Internet connection.
By 2017, a projected 43 million contactless point-of-sale readers will be in place within the U.S. This accessibility is just paving the way for widespread NFC use in the merchant ecosystem.
A study done by Juniper Research noted that there would be over 200 million mobile wallets using contactless technology by the end of 2016. In addition, it is predicted that the use of contactless payments will grow by 100% in 2015.
One specific mobile wallet that has helped launch the popularity of contactless payments the past year is Apple Pay. Released in October of 2014, Apple Pay is currently available on the iPhone 6, iPhone 6 Plus, Apple Watch, and iPad (for online usage only).
Tim Cook, Apple CEO, predicts that Apple Pay will be accepted by over 1.5 million locations by the end of 2015 in the United States. Apple Pay has been the leader of mobile wallets thus far, accounting for two out of every three dollars that is spent on contactless payment purchases.
Apple Pay, as well as other mobile wallets, is so appealing to consumers since they allow quick and easy payments. Contactless payments not only expedite the checkout process, but also are safe as they use a security process known as tokenization. Instead of Apple Pay or other mobile wallets sending debit/credit card information to the merchant during a purchase, a one-time “token” is sent to the merchant’s terminal, ultimately protecting payment details during the transaction. Card information is only stored on the consumer’s smart phone and is never sent to the merchant directly.
All in all, we can expect an increase of contactless payments becoming more prevalent. With Apple Pay and other mobile wallets beginning to emerge, consumers will start depending on their smartphones to make purchases and will enjoy the fast and easy checkout process of contactless payments.