Contactless payment systems pros and cons | Ikajo International Blog


Advantages and disadvantages of contactless payment systems

Advantages and disadvantages of contactless payment systems
Business Development Specialist
Yuliia Mamonova
Table of Contents

    Tech companies and banks want you to tap and pay at stores instead of pulling out card or cash. Today you can make a contactless payment by waving your card at payment terminals. No need to swipe your plastic card through a device input a PIN to allow the transaction or sign a receipt.

    Apple released Apple Pay in 2014. Android joined the game by releasing Android Pay after 18 months. Some retailers like Starbucks and Walmart have their e-payment apps for customer’s convenience.

    Contactless payment is becoming popular among the younger generation. More people prefer to pay with a mobile phone for its several benefits. Yet many people still fear using a contactless payment system. They prefer the old traditional ways of making a payment.

    In this article, we will discuss the advantages and disadvantages of contactless payments. However, before that let us take a look at how this system works.

    How do contactless payment systems work?

    E-payment apps run on a device equipped with a Near-Field Communication chip. This technology enables a smartphone to send/ receive information using radio-waves over a short-range. This is an upgrade of the radio-frequency identification (RFID) technology.

    Companies like Apple or Google do not store any sensitive information on customers.

    All transactions take place in codes that are immune to hackers. So, your credit card and bank information are secure. So, is this the time to ditch your old-fashioned plastic cards and wallet for the digital version? Let’s take a look at the advantages and disadvantages of the contactless payment systems.

    Advantages of the contactless payment system for customers

    • This is a convenient way of making payment as you need to pay using your smartphone or card. So, there’s no need to move around with a bulky wallet full of cash and cards. No more hassles of keying a PIN to approve transaction or signing receipts.

    • This is a secure mode of payment that takes place between two devices. Customers don’t have to worry about fraudulent transactions. The contactless payment system does not need your card to come in contact with any device.

    • NFC technology uses data encryption during the transmission of sensitive information. This reduces the threat of hackers stealing valuable information.

    • The magnetic stripe is used only on cards, but contactless payment systems are available on different mediums. They are available on smartphones, key fobs, vehicles, or any mobile system.

    • This is a cost and time-efficient method for the average customer. Tapping to pay is much more convenient than any other payment methods. Customers can use a contactless payment card without taking it out of the wallet. It enables lines to move in transit venues, thus saving much time for average people.

    No more typo errors when entering your PIN. The contactless payment system is accurate, secure and quick.

    • Customers can keep track of loyalty points and rewards during purchases. Some banks may also offer cash back when you use the e-payment feature.

    • Contactless payments provide a platform for future innovation. In the past six decades after the invention of mag-stripe, not much has changed in the way it functions. We have seen a huge innovation in the field of e-payments, and we hope this trend will continue.

    • Mobile payment apps come with features you cannot imagine in a mag-stripe card. Some of these features are remote deactivation, virtual card provisioning, and user-configured pin-protection.

    Disadvantages for customers

    Few merchants use contactless payment systems. Not all customers are educated on how to use this technology. It can create confusion and frustration among users.

    • Only customers who have e-payment apps on their mobile phone can use this technology. People can’t leave home with their NFC-capable phone as they may need a mag stripe to make payment.

    • If you lose your credit card, this can be a threat. The thief will not need to enter a PIN or sign a receipt to make purchases using your card until it is blocked. So, your account may be compromised.

    • There might be a risk of malware or spyware attack on the device on the e-payment apps. Although these apps use secure data encryption, hackers are becoming smarter. They are inventing new ways to steal valuable online information.

    • With a contactless payment card, you cannot change the limit per transaction chosen by your bank.

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    Advantages for businesses

    Speed is the biggest advantage of using contactless payment systems. It increases customer satisfaction as waiting time is reduced. Customers don’t have to search for cards or cash. As a business, you no longer have to deal with verifying the change given back to customers. This simplifies cash management.

    • With contactless payment methods, merchants can accept more payments during the peak sales times. Businesses can reduce delays without having to hire extra staff.

    • Android Pay does not charge any commission on transactions. So, companies don’t have to pay any additional fees when customers use the app. It only charges the standard card processing fees.

    • With contactless payments, businesses can optimize their loyalty programs and improve customer relationships. You can send digital copies of loyalty, reward, membership/ gift cards, special offers, and rebates to your mobile phone.

    mobile payments

    Disadvantages for businesses

    • Customers may have trouble paying if the battery in their mobile phone is low.

    • Some people from the older generation may have difficulty using e-payment apps. They might not feel protected by this method, due to lack of education.

    You might also like 5 Trends for the Future of Payment Processing – Trends in Payments


    To make contactless payments a reality, more people need to be educated on how to use it. Merchants and tech companies need to educate people.

    Customers must be aware that Apple or Google do not store their information or use it in any way. The transaction takes place using codes so the sensitive data cannot be misused or hacked. Businesses that want to improve their customer experience must consider making the shift to contactless payment systems. If you have not used an e-payment mobile app or contactless payment card before, it’s high time you shed your inhibitions.

    Embrace the change and enjoy the benefits of using contactless payment systems. The world is going towards a digital revolution, where are you?

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