The Rise of Contactless Payments and Tap on Phone

Tap on phone (or tap to phone as Visa calls it and tap to mobile for Amex and Discover) is a contactless payment method where customers tap a seller’s smartphone instead of a credit card machine to pay. In this article, we’ll go over contactless payments and specifically tap on phone.

• What are contactless payments?
• Is contactless the same as a chip card?
• How common are contactless payments?
• What is tap on phone?
• Is tap on phone safe?
• Costs to Accept Tap on Phone
• Do all processors offer tap on phone?
• Tap on phone for iPhone
• Benefits of Tap on Phone
• Are there any drawbacks to tap on phone?
• How do I get started with tap on phone for my business?

What are contactless payments?

As noted in the introduction, contactless payments are credit card transactions where a customer uses either a contactless-enabled credit card or their smartphone with a credit card securely “stored” in a digital wallet to make a purchase. They simply hold (or tap) their card or phone to the contactless reader on a credit card machine to complete the transaction. This is done instead of swiping a magnetic strip or “dipping” an EMV chip card.

Is contactless the same as a chip card?

The technologies are different, but most chip cards are also contactless enabled. Near-field communication (NFC) enables contactless payments using radio frequencies at close distances to transmit and receive data.

You can determine if a credit card is contactless by looking for a small symbol showing a series of lines in a slight arc. CapitalOne provides this example:

How common are contactless payments?

Mastercard states that 2 out of every 3 transactions processed on its network are now contactless, up from less than 1 out of 3 in 2020. It’s highly likely that the Covid-19 pandemic, which drove many forms of low- or no-contact interaction, helped accelerate the adoption of contactless payments.

What is tap on phone?

Tap on phone is a relative newcomer to the contactless payments space. Available for a few years, it has slowly gained visibility. Instead of requiring your customers to tap their cards to a credit card terminal, they can actually tap their cards to your phone.

As you can imagine, this is not a payment experience you’ll typically use in a traditional retail environment. However, it could become more popular with businesses that take cards on the go. Business owners could offer tap on phone at tradeshows and pop up shops, food trucks, delivery services, or at other small businesses that don’t have standard credit card processing equipment. Many of those businesses already use their smartphones for accepting payments, usually through dongles that plug into the phone’s headphone jack. This is the next evolution of smartphone payment acceptance. Instead of a small business owner swiping a card through the reader attached to their headphone jack, the customer would simply tap the card to the business owner’s phone.

As with other phone-acceptance methods, you’ll have the option to email or text a receipt to your customer, meaning you won’t have to lug around a receipt printer.

Is tap on phone safe?

Yes, tap on phone is a safe payment acceptance method. Like other forms of contactless payment, it uses tokenization and encryption to maximize security. The data exchanged between a card and the smartphone accepting the payment will be encrypted. That means that it’s ‘scrambled’ so that it’s unusable without decryption keys even if a hacker could intercept it.

With tokenization, your actual card details are replaced with a unique, one-time-use “token” specifically for that transaction. Even if the data is intercepted, it can’t be used for other transactions or to access card information.

Additionally, as with using a card reader in a headphone jack, card data is not stored on the phone. Lastly, NFC itself is already low risk, as the transmission between devices can only occur over very short distances (usually inches or less). That minimizes the chances of data interception.

Costs to Accept Tap on Phone

Tap on phone is considered a “card-present” transaction and your processor will charge card-present rates. It should not cost anything additional beyond your usual processing costs to accept tap on phone payments.

However, rates and fees for card-present transactions vary considerably. There are a few important factors that play into your cost, including your industry, average monthly volume, and average transaction size.

Some small businesses will benefit from flat rate pricing (such as Square) while competitive interchange plus pricing will be more cost-effective for other businesses. If you need help determining the right solution for you, check out our article on credit card processing pricing models or sign up for a free CardFellow account.

Do all credit card processors offer tap on phone?

No, not yet. While both Visa and Mastercard support tap on phone, it’s still up to individual processors to offer the service. Tap on phone requires a mobile app, which not all processing companies have developed.

Processing companies that specialize in on-the-go payments for smaller businesses are the most likely to have an app available for tap on phone. This includes big names like Square and Stripe, which both offer tap on phone for Android, and Clover, which offers tap on phone for iPhone. However, other companies may also be able to offer it.

If tap on phone is a priority for you, be sure to check with your current processor or get a free account at cardfellow.com to find the right processing company.

Tap to on Phone for iPhone

Apple touts its ability to enable tap on phone technology, but in reality, any NFC-capable phone with a tap on phone compatible app can accept a contactless payment. On its website, Apple states that in order to use its tap on iPhone option, you would still need a supported app, and lists options that include Zettle, Clover, and others.

Benefits of Tap on Phone

The biggest benefit of tap on phone is that you don’t have to purchase any credit card processing hardware. While the invention of Square and other headphone jack or Bluetooth card readers already offered a more affordable hardware option, tap on phone effectively drops it to zero. You can use your existing smartphone (provided it’s NFC-capable) to accept payments without any other hardware.

It’s true that you could do that with Square and other mobile options by keying in card details, but keyed transactions (as a “card not present” transaction) are more expensive than swiped or contactless transactions. That means that tap on phone provides both the benefits of hardware-less payment acceptance and the lower card-present transaction costs.

Are there any drawbacks to tap on phone?

From security and cost standpoints, no. Tap on phone is as safe as other methods of accepting payments and doesn’t (or shouldn’t) cost anything additional to accept. (If your processor charges you more to accept tap on phone, it’s worth looking for a new processor!)

The only potential drawback is customer perception. If customers feel uncomfortable with making a payment through your smartphone, they may not like the tap on phone option. However, many customers have gotten comfortable with phones as a payment terminal over the past couple decades, as devices like Square became ubiquitous.

How do I get started with tap on phone for my business?

If you’re looking for a tap on phone solution, the first question is “are you working with a processor already?” If so, you can start with that company and determine if they offer a compatible tap on phone app. If they don’t or if you don’t have a processor, you’ll need to find one.

The easiest option is to use a credit card processor comparison service, such as CardFellow, which will show you real quotes for your specific business. It’s free to use and completely private, so there are no sales calls or pressure to buy. You’ll simply compare processors, ask questions through a secure message system, and determine the right option for your needs.

Give it a try at cardfellow.com!