Transaction security amid growing demand for contactless payments

Developments in technology and ease of use contribute to the growing popularity of contactless payments in all their forms. Will the new devices and payment acceptance points replace the ones we are used to in the future?

August 22, 2022

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  • Globally, almost half (48.6%) of the e-commerce payments value in 2021 (approximately USD 2.5 trillion) was brought by digital wallets
  • 6 in 10 European consumers use instant payments for online purchases, 43% of surveyed consumers using them for P2P or in-store payments
  • Through tokenized payments, customers can benefit from personalized reward programmes for their transactions
  • Over 50% of Gen Z and millennial users can leave a store if it doesn’t accept contactless payments
  • More than 60% of youngsters prefer mobile payments for online purchases
  • 83% of businesses rate e-commerce fraud management as extremely important to their business strategy
  • In 2022, over half (53%) of all software revenue will result from subscription business models
  • Payment tokenization alone reduces criminal activity by 26% - Visa
  • In Spain, digital wallets and bank transfers are expected to overtake cards by 2023
  • In-vehicle payments are projected to reach USD 86 billion in 2025


Table of contents:

1. What are contactless payments

2. Contactless payment security concerns

3. The technology behind contactless payment security

4. Why it is important for merchants and acquirers

5. PCI compliance and cost savings

6. The global situation and trends

7. Payment tokenization empowers the growth of other niches

8. Why contactless payments should be a priority for banks

9. The push to go cashless and personalized experiences

10. Summary

1. What are contactless payments

Contactless payments represent a popular type of payment technology that makes cash and card swiping obsolete. At checkout, customers can perform a contactless transaction by tapping a card or mobile device on a payment terminal.

To accept contactless transactions, the merchant must have compatible NFC-enabled point-of-sale (POS) systems. Alternatively, merchants can use a SoftPOS solution; by installing a SoftPOS app, business owners can turn their own smartphones into POS terminals and accept contactless payments.

Even though there are multiple parties involved (acquiring banks, payment schemes, and issuing banks, to name a few), the payment terminal allows all of them to connect and the transaction is completed in a matter of seconds. The whole process is meant to reduce queues, improve the checkout experience, for both the consumer and the merchant, and decrease COVID-19 transmission since there is no touching involved.

Forms of contactless payments

Contactless card payments use RFID (radio frequency identification) technology that enables its user to wave or tap a card over a card reader to make a payment. This technology is based on emitting a series of electromagnetic impulses that pass a user’s card information from their card to the POS terminal.

Contactless mobile payments require a mobile device - a smartphone, a smartwatch, or another NFC-enabled device. They are based on NFC (near field communication) technology. NFC-enabled devices can communicate with each other via radio frequencies and exchange data. A smartphone equipped with NFC technology and a payment app (Google Pay or Apple Pay, for example) can be used similarly to a card. Users can swipe their phones over an NFC-enabled card reader and their payment is accepted.

The pandemic acted as a catalyst for contactless payments’ popularity, largely due to sanitary measures. Notably, the WHO advised consumers to stay away from cash and adopt contactless payments.

Contactless payments popularity in numbers
  • According to Statista, NFC payments are expected to triple in number in the European market until 2024. Statista also argues that Europe could be overcome by the rest of the world, due to an indecisive approach to payments, as shown in the past.
  • Globally, almost half (48.6%) of the e-commerce payments value (approximately EUR 2.459 trillion) was brought by digital wallets, in 2021. By 2025, FIS projects that the transaction value will increase to 52.5% by 2025.


  • UK Finance reports that in 2020 contactless payments surged by 12% in the UK, reaching 9.6 billion, compared with 2019. In 2020, contactless payments accounted for 27% of all UK payments.
  • The report showcases a high increase in mobile payments (via smartphones or smart watches). By the end of 2020, close to a third (32%, 17.3 million people) of the UK’s adult population were registered to utilise mobile payments. Compared with the previous year, this number of people increased by 7.4 million.
  • Also, it seems that contactless payments have more of a younger audience. In 2020, over 50% of 16- to 34-year-olds were using mobile payments as opposed to just 11% of people over 65 years of age, the report observes.
  • The pandemic had more people working remotely. Online and mobile banking allowed those working from home to perform banking operations freely during the lockdown period. Online banking was used by 72% of UK adults in 2020. Over half of the population (54%) used mobile banking.
  • Regarding the business sector, in 2020, over half (54%) of B2B payments were made via Faster Payments or other forms of online/mobile payments, UK Finance reports.
  • In Europe, 8 in 10 transactions involve contactless payments, a trend mainly influenced by the pandemic (it rose by 25% compared to pre-pandemic levels). The NFC payments market is expected to triple in Europe by 2024.
  • According to a survey, 6 in 10 European consumers use instant payments for online purchases, 43% of surveyed consumers using them for P2P or in-store payments. FinXP cites data from Digital and Card Payments Yearbooks 2022 to showcase that mobile wallets are a growing trend in Europe, pushed by online commerce growth.


  • In the US, over 80% of consumers paid contactless in 2021. Most of the Raydiant survey respondents (47.2 percent) explain their attraction to contactless checkout with its lack of hurdles. Paying by mobile wallet, Tap to Pay, or various apps is seen as easier than scanning or inserting cards, or paying by cash and waiting for change. Tap to Pay became a popular mobile payment option, Square being one example of big players adopting Apple’s payment technology. On the other hand, Google’s Android payment integration has a huge market to tap in India through UPI.
  • Mastercard found that there were 1 billion more contactless payments in Q1 of 2021 alone, compared to Q1 of 2020. In India, contactless transaction usage grew twofold (from 2020 to 2021), while in Thailand it quadrupled.
  • In Latin America, the pandemic influenced contactless technology adoption. For example, the Brazilian Association of Credit Card Companies and Services (ABECS), during the first half of 2020, saw contactless transactions skyrocketing by 456% compared to H1 of 2019. ABECS believes that almost 50% of credit card transactions will be contactless by the end of 2022.
2. Contactless payments and security

Contactless payment limits have been raised in 29 European countries, covering most of the region. The new limits vary by country, in part due to the different currencies involved, but most of them have adopted a limit between EUR 40 to EUR 60.

Reasons for the UK and the EU raising the contactless limits
To take the UK as an example, initially, contactless payments were used to buy small items. The pandemic made contactless payments the norm, primarily as a sanitary measure. People needed to buy essentials and avoid contact as much as possible. The government had to adapt to allow customers and merchants access to safe and secure transactions.

Contactless cards were introduced back in 2007, in the UK, with a GBP 10 limit. In 2010, this was raised to GBP 15 and then to GBP 20 in 2012.

According to the UK’s HM Treasury, the proportion of debit card payments made using contactless rose from four out of 10 in 2019 to six out of 10 in September 2020. As of October 2021, there were a total of over 1.3 billion contactless transactions made.

In the wake of COVID-19, the adoption of contactless payment solutions has accelerated globally as consumers prefer low- or no-touch interactions. Visa's Back to Business Study shows that nearly two-thirds (65%) of consumers would prefer to use contactless payments as much as, or even more than, they are currently, and only 16% say they would revert to their old methods of payments, post-pandemic.

Mastercard found that over half of millennial and Gen Z consumers are likely to avoid shopping at stores that don't offer contactless payment at the point of sale. However, even baby boomers are converting - their preference for contactless increased from 45% before the pandemic to 55% today.

Today, it is the preferred choice of payment in many countries, with the contactless market set to reach a global value of USD 6.25 trillion by 2028. According to UK Finance, contactless payments jumped from just 7% to 27% of all payments over the last four years. In the UK, 83% of people now use contactless.

As a result, from 15 October 2021, retailers and merchants saw a further rise in the single payment limit for a contactless card transaction, increasing from GBP 45 to GBP 100 and the cumulative transaction limit before reauthentication will increase from GBP 130 to GBP 300.

Contactless payment limits were raised in 29 European countries, covering most of the region. The new limits vary by country, in part due to the different currencies involved, but most of them are between EUR 40 and EUR 60.

The GBP 100 UK limit is over double the EUR 50 (GBP 42) of that across the Eurozone countries such as Spain, Germany, and Portugal.

Switzerland has the next highest limit in Europe after the UK with a contactless limit of 80 Swiss Francs (GBP 63). Sweden has a contactless limit of GBP 34, while their Scandinavian neighbours Norway have a limit similar to the rest of Europe of GBP 43.

Poland has the lowest contactless limit in Europe at just GBP 18 while North Macedonia is just above at GBP 27.

Potential dangers
Stealing cards is a popular criminal activity, with 4 in 10 thefts from 2019 involving stealing cards. Increasing the contactless limit could result in card theft rates rising. The same report advises customers to opt for more secure contactless mobile payments. They require either PIN verification or biometric identification, so they are rendered useless in case of theft. In the UK, more than 90% of citizens use a smartphone.

However, the FCA has fought against the news of the additional customer security risks, mentioning Canada, Singapore, and Australia as examples where raising the contactless payment limit was not followed by an increase in financial crime.

Research has found that the Apple and Visa contactless payment technologies can be vulnerable to fraud. Apparently, fraudsters could hack the lock screen of an iPhone to use its contactless payment features.

Moreover, researchers from ETH Zurich University found that it is possible to bypass PIN codes on Maestro and Mastercard contactless cards.

Consumer spending concerns
Research shows that people spend differently, depending on which payment methods are made available to them. Study from Warwick Business School concluded that contactless payments promote increased purchases and debt use.

However, this does not prove that consumers will purchase more due to the higher contactless payment limit. There are some, in fact, who fear that the new limit will affect their personal finance management.

Contactless payments adoption is hindered by a persistent perception that mobile wallets are not secure enough. Almost half of US consumers believe that if an attacker gets hold of their phone, they would lose their sensitive information. Payment service providers should work harder to reassure consumers that mobile wallets are safer than traditional banking instruments.

Another consumer concern is mobile payments failing when they are needed, with many people (41%) choosing to carry secondary payment options such as cash or physical cards with them.

Finally, a great customer concern is that contactless payments are not accepted where they shop. Better education on mobile payments benefits could persuade small and local businesses to provide a wider acceptance, which includes contactless payments.

How are pain points addressed?
In the UK, contactless card purchases are protected by the Consumer Credit Act. This piece of legislation protects items ranging in price from GBP 100 to GBP 30,000 if they were purchased with a credit card.

Another concern is that customers could get themselves in debt due to impulse buying. To address this, some banking apps allow users to set their own limits to avoid overspending.

Strong Customer Authentication
The limit increase has made opportunistic fraudsters active because now they can swindle people out of GBP 100 worth of goods (per transaction). They can do this simply by stealing a card.

Strong Customer Authentication (SCA) is meant to add a layer of protection to consumers’ online payments. It works by having users confirm their identity whenever they make a transaction. Contactless transactions have consumers go through the SCA process as well. Before this regulatory move, all people had to do was tap their card and make the transaction.

Payment service providers (PSPs) and card issuers have to apply Strong Customer Authentication when a customer initiates a payment, as per PSD2’s requirements. The PSPs initiate the identification either in POS or online payment (this is authentication, the process of determining whether the customer is indeed the person they say they are) Authorisation, (the request made to the card issuer to approve the transaction) comes after this process, right before the transaction is completed.

Strong customer authentication is meant to improve payment safety via two-factor authentication. This authentication method requires two of three factors – knowledge, possession, and inherence – to validate the transaction. For example, using a chip and PIN at the POS, the chip corresponding to possession and the PIN to knowledge.

3. What technology is behind contactless payment security


Payment Data tokenization

Tokenization works by swapping sensitive information (e.g. a bank account number) with a non-sensitive substitute, known as a token. The token has no real value or meaning because it consists of a randomized data string. The token keeps all relevant data available, without compromising its safety.

Mobile wallet providers (Google Wallet, Apple Pay and others) and loyalty mobile apps (e.g. Starbucks, Daily Deals) allow customers to pay directly from their smartphones or by using a POS scanner to read barcodes or QR codes on their screens.

As opposed to encryption systems, which can be deciphered through a secret key, tokenization keeps the original data but does not offer any way to decipher the token to discover the original.

Sensitive information, such as the consumer’s front of the card number (PAN – primary account number), is protected by tokenization. In this case, the PAN is switched to a different number, dubbed a token. When the consumer uses the card to pay, the token is used instead of the real account details. To prevent cross-channel fraud and data breaches, tokens can be used on a limited basis. The primary focus of tokenization is mobile payments.

An example of a mobile payment tokenization setup would look like this:

  • The merchant adopts (buys, develops, whitelabels) a dedicated app to accept payments. The app can be used in-store and/or online – depending on the merchant's business vertical.
  • The consumer installs the app and embeds their payment card. This is where the card data tokenization takes place: card details are saved as a token, which is stored inside the app and used to exchange payment information.
  • Whenever the consumer has a payment due to the merchant (see types of payments below), they are charged via the app using the token, without having to enter card/payment details each time. Customer authentication is conducted using a smartphone via face recognition, biometrics, or other suitable security measures.
  • The saved token is unique to this merchant, and won’t work outside of the app. Even if the merchant’s data vault is compromised, there is no risk of sensitive data being lost.

How tokenization helps to secure the transaction data

Mobile payments
Digital wallets store credit card information but the primary account number is replaced with a token, received by the issuing bank. This allows card details to be kept safe in case a smartphone is misplaced or stolen, since the device holds no real payment information.

Through tokenization, customers can benefit from a more personalized payment journey by storing their payment preferences for future shopping. In case of a data breach, the customer does not stand to lose sensitive account information due to their card information being tokenized.

Moreover, because every merchant will use a different token when keeping a customer’s card details on file, there’s no chance of a widespread leak that would require them to cancel their card completely.


Examples of payment tokenization

Among all types of tokenized payments, there are three that prove to be most popular and they differ based on who participates in the payment process and when the payment occurs.

One-click payments have the customer as an active participant. They are commonly found in e-commerce platforms when the customer has to complete the checkout process.

By contrast, scheduled and unscheduled recurring payments, both are initiated by the merchant. In both cases, the customer is a passive participant. Recurring payments happen automatically, in either a scheduled (e.g., subscriptions) or unscheduled manner (e.g., ride-sharing).

One-click checkouts
E-commerce and brick-and-mortar businesses alike can use the convenience of one-click checkouts to their advantage by safely storing a returning customer’s data and enabling them to finalize a transaction with one click.

One-click payments make the purchasing process more convenient to the customer, which often encourages them to buy more. This leads to lower cart abandonment rate, higher conversions, and, ultimately, more sales.

For example, S’Wheat is an e-commerce platform that allows consumers to perform one-click checkout. By partnering with Shopify, it allows customers to pay with pre-saved cards. Rimi is another e-shop that allows customers to use previously saved cards to pay; the checkout process is completed by following the bank’s SCA process (which does not require card information). Cofyz is an app that allows users to buy coffee in advance and schedule a time for picking up the beverage in store.

Recurring payments
Subscription payment models allow businesses to better serve their customers while opening up new revenue streams. Tokenization allows businesses to implement recurring payments by saving a token representing the customer's card and using that on subsequent charges.

This can be applied to streaming services such as Netflix or Disney+, gyms, or other subscription-based service providers. For example, is a gym-targeted software provider that allows gyms to implement recurring payments. Gym customers can save their card in the gym’s app in order to be automatically charged for their membership once a month, with the same fixed fee.

Unscheduled recurring payments
As opposed to regular recurring payments, where the customers agree to a paying schedule, unscheduled recurring payments allow merchants to determine when to charge their customers.

These payments are common with taxi and ride-sharing apps, such as Uber or Bolt. First, the customer saves their card in the app and they are charged either right before or immediately after their ride.

This can be applied to streaming services such as Netflix or Disney+, gyms, or other subscription-based service providers. For example, is a gym-targeted software provider that allows gyms to implement recurring payments. Gym customers can save their card in the gym’s app in order to be automatically charged for their membership once a month, with the same fixed fee.

Unscheduled recurring payments
As opposed to regular recurring payments, where the customers agree to a paying schedule, unscheduled recurring payments allow merchants to determine when to charge their customers.


These payments are common with taxi and ride-sharing apps, such as Uber or Bolt. First, the customer saves their card in the app and they are charged either right before or immediately after their ride.

4. Why it is important for acquirers and merchants

Contactless payments are seen as great facilitators for customers’ day-to-day purchases and they are seeing increased popularity from both consumers and merchants. Merchants can even abandon POS terminals altogether and switch to app solutions, such as SoftPOS. Why should customers and merchants alike abandon chip & pin and go contactless? Are there any drawbacks to contactless payments?


Advantages of payment data tokenization

Contactless payments come with immediate benefits for consumers and allow merchants to improve experience for their customers, both offline and online, and become great experience creators.  A good example is Cofyz, the app mentioned earlier, which allows users to buy coffee in advance and schedule a time for picking up the beverage in store.

Recurring payments have also become popular across industries including fitness, streaming services, or utility companies. 

The advantages of tokenized contactless payments include:
  • They are faster than credit swiping, cash payments, or other in-person payment methods, and they improve customer experience as a result. Also, the customer has the opportunity to schedule the payment for services/deliveries, which is highly convenient and flexible.
  • Criminals who get their hands on tokenized payment data, cannot use the stolen information to make online payments since they do not have the necessary payment information, initially stored securely by the payment partner. According to Visa, network tokenization can reduce criminal activity by 26%. Both consumers and merchants can benefit from improved security, due to the payment information being kept secure to ensure safe transactions.
  • They provide the possibility to conveniently choose between paying with a contactless card or a smartphone (or other smart devices).
  • Mobile/in-app contactless payments cut down on queuing times because they allow payments to be made remotely and they do not depend on a POS system. Tokenization allows shoppers to save their payment information securely with a specific merchant in order to use it again for future purchases. One-click checkout can increase customer conversion at the checkout page because the payment process is significantly simplified.
  • During the pandemic, contactless payments observed a surge in use because they were COVID-safe and more hygienic than other payment methods.
  • A benefit for merchants is that contactless payments often encourage impulse buying for shoppers, due to ease of use.
  • Merchants do not have to pay extra charges for accepting contactless transactions, as long as they have an NFC-enabled POS system or SoftPOS-enabled device. The fees attached to NFC payments are similar to those of regular payments.
  • Since customers are able to make purchases easier, merchants could increase their conversion rates. Consumers tend to enjoy their shopping experience more and return to the same vendors they consider trustworthy when their data is handled with due security. Through tokenization, the customer's vulnerability to fraud is lowered greatly. Data fragmentation is also made obsolete and privacy concerns are dealt with since no-one besides the cardholder has access to their personal data. To put it bluntly, tokenization is safer than entering a PIN number.
  • Through tokenization, customers can benefit from a seamless payment experience using a more secure and faster checkout. It also opens ways for new retail and marketing opportunities, such as personalized reward programmes. As a result, this leads to increased customer trust and repeat business, which, in turn, boost merchant revenue.
  • Due to increased popularity, merchants who accept contactless payments often experience increased customer loyalty, which helps drive authorization rates as a result.
  • NFC technology helps merchants to personalize loyalty programmes. For example, it enables them to offer vouchers straight to their customers’ smart devices.
  • Contactless payments are reportedly more secure and reliable than other payment methods, due to chip technology, data tokenization, and encryption (more on this later).

When it comes to the shortcomings of contactless payments, some of the more frequent concerns have to do with their security and accessibility:

  • Because of their ease of use, contactless cards can be stolen and used by fraudsters. Mobile contactless payments are a safer alternative due to biometric/PIN verification.
  • The same limits mentioned above prevent buyers from making large purchases via contactless payments.
  • Smartphones have to be adequately charged in order to enable contactless transactions.
  • Older generations may show distrust of contactless payments, preferring traditional methods such as cash payments instead.
5. PCI compliance

PCI (Payment Card Industry) compliance is not cheap. Depending on business size and nature, reaching PCI DSS compliance can prove to be expensive and time-consuming. Besides the costs associated with the initial certification, merchants could reportedly pay at least USD 100,000 per year in maintenance fees. Also, besides the huge money investment, merchant would have to spend years of work to obtain the certification.

Before a business can start reaping the benefits, they need to make substantial investments (both time and money-wise) in developing and setting up their own solution. For this reason, many merchants and banks prefer to use partners such as DECTA, which are fully PCI DSS compliant and have payment tokenization technologies to minimize the risks.

Through payment tokenization, the risk of data breaches is lowered. This is because there is no real payment data stored on the merchant’s server, ensuring PCI compliance  without having to resort to costly security systems. This removes compliance responsibility from merchants and shifts the liability to the financial institutions providing the payment service.

PCI Compliance is an ongoing process that helps prevent security breaches and payment card data theft. PCI compliance refers to a set of 12 security standards that businesses use to keep customer card data secure. It refers to fulfilling PCI DSS regulations for sellers and organizations to aid safe and secure acceptance, storage, processing and transmission of cardholder data to stop theft and fraud during transactions. Even if a merchant only processes one card transaction per year, it must be PCI compliant.

Tokenization is a PCI-approved method of protecting payment card industry data and is authorized by the PCI Security Standards Council (SSC) to use in pursuit of PCI Compliance. It enables retailers to comply with PCI DSS while incurring low liability and security costs.

6. The global situation and trends

Europe and China lead the world of contactless payments. According to the Financial Times (FT), Sweden and Finland share the podium with China when it comes to the societies closest to being cashless. China leads the world of e-commerce due to having a suitable payments ecosystem for developing e-commerce technology. Also, China has a population that is highly attracted to smartphones, thus more inclined to use mobile payments.

FT reports that Sweden is the most aggressive European country in its mission to become cashless. Only 2 in 10 Swedish transactions are made with cash. The Swedish population also has access to Swish, a popular payment app used for instant P2P payments.

Finland is the other Nordic European country with an aggressive cashless mission. However, with reportedly one of the highest internet banking and smartphone penetration in the world, it would be more accurate to call Finland cashless-ready rather than cashless.

Poland, says FT, is another country looking to popularise cashless payments. The country has a public-private foundation that provides POS systems free of charge to merchants via partner banks. The foundation’s mission is to convince merchants that cashless is the future, reportedly helping over 200.000 SMEs accept card and mobile transactions.

The status of tokenization around the globe
In Latin America, Covid has changed the payments landscape, as people started to switch from cash and check-based payments to mobile contactless payments. This has led to fraud rates growing by 35%. Therefore, Mastercard announced that more than 50% of the region’s payments volume is ready to be tokenized.

In India, financial institutions and payment aggregators push to implement card tokenization, and research methods to introduce tokenization for digital payments. RBI (the Reserve Bank of India) announced in June 2022 that it extended the deadline for credit and debit card tokenization to 30 September 2022. Merchants and payment aggregators must use tokens instead of real card details.

In Europe, we see a shift toward contactless. For example, Romania was a cash-heavy country, prior to the pandemic. COVID-19 heavily influenced cash usage, and the number of cash users decreased to 21% (from 45%). On the other hand, contactless card users reached 59%. In Spain digital wallets and bank transfers are expected to overtake cards by 2023, due to popular local wallets BBVA Wallet or CaixaBank Wallet, besides giants such as Apple Pay or PayPal.

Digital Europe reports that contactless payments go hand-in-hand with the EV infrastructure. Due to being quick and convenient, contactless payments are suitable for EV charging and can be used to persuade consumers to shift towards e-mobility. Users and owners of electric vehicles are reportedly increasingly using contactless payments at the POS, due to their capacity to attend to the users’ payment method preferences.

The UK also observed a rise in digital wallet popularity, with predictions that this payment method could soon rival cards. Google Pay and PayPal are the most used for online payments.

Consumer behaviour keeps changing and demands further innovation from service providers.

Digital wallets are a popular payment method for online transactions. Unbanked or underbanked people benefit from digital wallets by sending and receiving money to and from friends and family.

Also, contactless ways to pay have increased dramatically as smartphone popularity soared. Mastercard has reported that Tap-and-Go card payments at pharmacies and grocery stores doubled when compared to non-contactless payments between 2019 and 2020. Visa has released its proprietary Tap-to-Pay option on Android to enable merchants and small businesses to use SoftPOS solutions (turn their smartphones into contactless POS systems).

Furthermore, payments using biometrics are becoming popular among consumers. California-based Daddy’s Chicken has rolled out facial ID-kiosks that allow customers to pay by using biometrics and earn loyalty points.

Same goes with in-car payment through voice command. A study by Juniper Research shows that in-vehicle payments are projected to reach USD 86 billion in 2025.


In May 2022, Mastercard introduced the Biometric Checkout Program. This service enables biometric payments. With a wave of their hands or just by smiling, this type of in-person payment can be used to checkout at large retailers or small businesses.

The retail industry knows how important it is to ensure customer satisfaction. Telpo partnered with Burger King and Alipay to roll out smart terminals. These payment terminals are equipped with Alipay’s face payment technology which incorporates AI (artificial intelligence) and biometrics, among others to improve the customer journey. Through these self-service kiosks, customers can do the whole checkout experience by themselves, reducing queue times.

Key technological advances
According to FIS research, consumers, merchants, and issuers stand to gain from contactless payments. The advantages for consumers can be summed up as convenience, ease of use, and speed, while merchants and issuers benefit from quicker transaction times, higher card payment volumes, operational cost reduction, and increased cash payment market penetration. The growth of contactless payments is driving the development of other niches as well as forms of payments.


  • Amazon Go has launched the Just Walk Out technology for several retail clients, besides its own branches. Through this technology based on computer surveillance and sensors, a store can keep track of when customers physically pick an item up from a shelf. Also, Just Walk Out knows when consumers return, add, or take away items from virtual carts. Customers can now ‘just walk out’ with the desired item because it was previously scanned and charged automatically to the customer’s account.
  • US-based biometric payments solution provider PopID introduced a cloud-based facial recognition solution to enable consumers to ‘pay by face’. This payment method is applied to ordering at drive-thru stations or kiosks.
  • US-based drivers can now make parking reservations and payments at approximately 75,000 off-street locations in the US, directly from their car. By using the voice command ‘Alexa, find parking nearby’ providing a specific destination to the virtual assistant, drivers will be able to find parking with their voice.
  • Apple has rolled out an updated CarPlay solution to support drivers with fuel payment and other driving-related task apps. The update will be released alongside Apple’s iOS 16 update later in 2022.
7. Payment tokenization empowers other niches' growth

With tokenization, every device could turn into a payment method since payments are connected to digital wallets and safety is guaranteed by tokens being used instead of real data.

Tokenization opens the door not just for new devices (e.g. cars) used for payments but also for new niche industries.

Through tokenization, hotels can keep their guests' sensitive data on file. Tokenization’s encryption process protects the data from criminals. Since the hotel does not need to be preoccupied with the guest’s sensitive data, it can focus more on customer satisfaction while also reducing PCI compliance requirements.

When a hotel makes a reservation, a token is created. The guest does not need to show their real payment data again, resulting in a speedier check-in process. The token can also be linked to NFC-enabled wearable devices for greater convenience. This way, the guest doesn’t need to remember to bring their wallet everywhere and still will be able to pay for drinks, snacks, spa, and so on. A hotel could provide its guest with a complete experience, from check-in to check-out, without having them use a payment terminal.

Contactless ticketing is also growing in popularity, as public transport is used more and more, mostly due to environmental concerns.

Commuters do not have the time to find a sales point, stand in line, select the right fare, keep track of change, and stamp their tickets. All this can be bypassed through contactless payments as they could turn everything into a card or phone tap on a digital validator when boarding. Specially designed apps could determine a passenger’s best fare based on how much they have to travel that day. Tokenization in combination with biometrics could provide the necessary security to the process.

8. Why contactless payments should be a priority for banks

The global contactless transactions market size is projected to grow to USD 18 billion by 2025. The new type of consumer behaviour corresponding to contactless payment affinity is shaped by the innovation in both mobile technology and contactless transactions. Consumers actively use smartphones, pay contactless, and use multiple devices daily. Banks who do not take these into account stand to lose their clients to the competition.

Consumers want contactless payments
Today’s generation is digitally native. Gen Z in particular wants to try the latest innovations and the resulting payment habits point to contactless transactions. Mastercard’s global research demonstrates that over 50% of Gen Z and millennial users can leave a store if it doesn’t accept contactless payments. Even older generations (baby boomers) started to shift their cash-heavy mindset to contactless – 45% preferred contactless payments before COVID-19. Now, 55% of baby boomers want contactless payments.

As a result of preference shifting across all age sectors, issuing banks started to launch contactless cards. However, consumer demand and competition from digital wallets such as Alipay or Google Pay have heated up the competition in contactless payments availability across regions.

Smartphones turn into payment terminals
Apple has begun turning iPhones into contactless transaction terminals. If Apple using merchants found this as great news, third-party providers of contactless payment solutions, like Square, discovered a bigtech competitor entering the market. Through this new solution, Apple will make any outside contactless system accessory redundant for iPhones. Bloomberg reports that iPhones will come with embedded contactless payments starting with iOS 15.4. iPhones with NFC chips embedded into their design are available since the launch of the iPhone 7. As a result, millions of iPhone users can make contactless payments without third parties being involved.

Apple has also turned wearable devices into contactless payment terminals, alongside Samsung. Both tech giants manufacture watches with embedded NFC chips.

On-demand economy
Contactless payments are slowly becoming part of the ‘on-demand economy(customers request services or products which are delivered soon). Ride-sharing apps such as Uber or Bolt are examples of companies offering on-demand services. They allow users to connect a card to an app once and then make unscheduled recurring transactions for their trips without resorting to cash. Contactless payments are also available on Facebook, Instagram, Twitter (social networks) or WhatsApp, Viber, and Telegram (social messengers), to meet customer demand.

Banking competition
As mentioned before, banks must adapt to the rising customer demand for contactless payments. If not, they stand to lose clients to more agile competitors. A couple of examples where digital banks have successfully implemented contactless payments into their banking systems are N26 and Revolut. Both companies provide mobile banking and have no physical branches, yet they are incredibly popular. The reasoning behind it was also mentioned before: the world currently has impressive smartphone and internet penetration. If people have a phone with internet access, they find it easier to manage their finances or pay online or on the go, instead of going to a branch or carrying their wallets.

9. The push to go cashless and personalized experiences

The majority of consumers want to continue to use digital payments post-pandemic. According to PwC, cashless payment volumes are projected to increase by more than 80 percent globally by 2025, reaching nearly 1.9 trillion, and to almost triple that by 2030.

The data associated with cashless can be leveraged to create targeted rewards and incentives based on key consumer behaviours, to build loyalty, grow engagement, and boost revenue growth.

Consumers demand convenient payment methods to make their lives easier. Moreover, they expect great value and a customised experience. In response, cashless organisations will soon be able to harness customer data to reward customers, give personalised experiences, and offer tailored services.

Digital wallets are gaining popularity
In recent years, digital wallets spend has increased, with many cash users making the transition to mobile payments.

This is caused by the boom in QR codes, super apps, and mobile banking. Gen Z is particularly fond of mobile payments. According to Logica Research, more than 60% of youngsters prefer mobile payments for online purchases.

Speed and simplicity are the main reasons behind consumers preferring digital wallets over traditional wallets. Smartphone users spend five to six hours per day on their devices, digital wallet purchases are as regular in physical stores as they are online.

The report also discovered that mobile wallets’ share of global POS transactions jumped over 21% in 2021 since 2020, rising to over USD 13.3 trillion, or over 28.6% of global POS transaction value.


User preferences and habits
Merchants had to adjust the way they operate due to evolving consumer behaviours and demands. As a result of the pandemic, millions of shoppers shifted to different ways to pay. Visa’s global Back to Business study discovered that almost 8 in 10 consumers have shifted their shopping habits as a response to COVID-19, using less cash, shopping online whenever they could, and paying contactless at checkout.

Thus, businesses had to rethink the ways they operate, to reduce contact and enable new digital experiences. Moreover, merchants had to develop or adapt strong security systems for fraud prevention and detection. In the near future, businesses will have to find the right balance between convenience, customer experience, and security to differentiate from competitors.


According to a study in Statista, losses in online payment came close to USD 20 billion in 2021, a 14% increase in one year. Of all the sales outlets, 54% of customers encountered fraud attempts in online transactions, followed by spam calls, door-to-door sales, postal mail, and in-store sales.

With the accelerated adoption of e-commerce, a 2019 CyberSource Masters of Balance report states that 83% of businesses rate e-commerce fraud management as extremely important to their business strategy. With more consumers coming online, a safe and simple checkout experience is imperative for building repeat customers. Tokenization enables merchants to offer a high level of data protection across a variety of payment technologies and provide smoother payment experiences.

Other advantages for merchants
SAP Insights has discovered that in 2022, over half (53%) of all software revenue will result from subscription business models. Payment tokenization for businesses allows storing their customers' tokens and facilitates scheduled or unscheduled recurring payments such as subscriptions, without running into security issues.

10. Summary

Developments in technology and ease of use contribute to the growing popularity of contactless payments in all its forms. In the future, new devices and payment acceptance points will replace the ones we are used to. It is important for banks and businesses to match the trend by investing in more innovative and secure payment technologies. An alternative is partnering with a service provider that already has the necessary technology and certificates. The latter option is faster, and guarantees (in case of the right partner) that the work is done by people who are experts in the field. DECTA is example of such company, providing all essentials to keep up with constantly evolving payment technologies:

  • Certified Mastercard/Visa acquirer processor who can also process tokenized payments
  • PCI DSS Certified
  • Technical payment service provider
  • Uptime 99.99%

This article is based on public materials and news. Other data is taken from industry reports and statistics at the links below. Forecasts and opinions that are not referenced are based on internal information provided by DECTA.

UK Finance
Financial Conduct Authority
UCL Jill Dando Institute of Security and Crime Science
Warwick Business School

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