Smart Card Alliance Smart Card Talk
July 2007 • Volume 12 Number 7






Feature of the Month

Accepting Contactless Payments: A Merchant Guide

The introduction of contactless payments technology into the mass market is an important development for both consumers and merchants.  Contactless payments provide immediate benefits to both parties in the form of more consumer control and increased consumer and merchant convenience.  And these benefits represent only the tip of the iceberg.
Even at this early stage, the evidence indicates that contactless payments have the strong potential for rapid adoption in the United States.  They offer a new, safe way to pay with advantages for both consumers and merchants.  They also open the door to new form factors and value-added applications.  Contactless payments allow creativity and differentiation to flourish on the foundation of the mature card industry.

Merchants who accept contactless payments realize advantages in several areas.  First, contactless payments are faster and more convenient.  Studies have shown that contactless payments reduce customer time at the POS by 30%-40%.  Contactless transactions are 63% faster than cash transactions, and 53% faster than traditional credit card transactions.  The most significant time savings are realized in the drive-through environment, where 12-18 seconds are saved off purchase times.

These increases in speed and convenience result in greater sales volumes and increased customer spending.  Customers spend about 20%-30% more when using contactless payment devices than when they use cash. 

Customers not only spend more, costs decrease when merchants accept contactless payments.  The use of contactless payments means fewer requirements to handle cash, improved operational efficiencies, and reduced maintenance costs. 

Contactless payments also present merchants with a tailor-made opportunity for clear differentiation.  Being able to offer "the latest thing" puts merchants in an excellent position to offer closed-loop products (such as gift cards) that strengthen customer loyalties and increase brand awareness.  The variety of form factors in which contactless payment devices can be available also supports differentiation.  Merchants and issuers can collaborate on payment products that blend specific features and packaging (cards, tokens, mobile phones) and target different customer segments with very particular requirements for the shopping experience.

This article is an extract from the new Contactless Payments Council white paper Accepting Contactless Payments: A Merchant Guide.  This white paper was developed to assist merchants who are considering deployment of contactless payments by providing practical information on how to plan for, implement, and roll out contactless payments successfully. 

Implementing Contactless Payments

Like any other change to the retail environment, implementing contactless payments requires planning.  The selection of a project manager and a cross-functional team with the knowledge and skill sets required to complete the planning and implementation process are critical to successful deployment of contactless payments.  It is also essential to work with certified processors and acquirers who understand contactless payments and can help with the implementation of a complete solution.  Merchants can also consult with card payment companies, issuers, equipment vendors, and other industry resources.

Before starting, everyone involved should thoroughly understand the current retail infrastructure and environment, including the unique needs associated with each retail location if contactless payments will be deployed in multiple locations.  This understanding is critical to successful implementation of contactless payments.

Planning requires identification of five different types of requirements:

  • Payment processing requirements
  • Physical requirements
  • Software and hardware development and certification requirements
  • Training requirements
  • Marketing requirements
  • Support requirements

Payment Processing Requirements
Payment processing requirements associated with implementing contactless payments must be identified through an analysis of the type of payment transactions supported. 

First, current transactions that will be accepted using contactless payment must be identified.  Each transaction type can take a different processing path, so this information is needed to determine what hardware and software must be certified to process contactless payments.  As part of this transaction analysis, transactions that will not require a signature (for example, transactions under the card payment brand's floor limit) should also be identified.

Second, merchants need to decide whether to process transactions online or offline.  Online processing (the most common) requires that payments be authorized "live."  For this reason, some merchants use offline processing.  However, merchants may assume additional risk for fraudulent transactions or certain chargebacks if offline processing is used.

Third, the data elements required by every transaction must be defined, including any data elements required by an acquirer, card payment company, processor, or all of the above.  Acquirers and processors must be able to identify contactless payments for all transaction types.

Next, merchants should confirm that their acquirers and/or processors support the contactless payment brands and transaction types accepted.
Physical Requirements
Physical requirements depend on whether the implementation is a contactless payments upgrade or a new implementation.  Every location at which contactless payments will be implemented should be surveyed.  The site survey is used to assess the number of terminals and/or readers needed for each location, electrical needs, data connectivity and cabling requirements, counterspace and mounting requirements, and locations for customer informational material.

Software and Hardware Development and Certification Requirements
Software development requirements can differ depending on whether the implementation is a contactless system upgrade or a new implementation.  In both cases, however, each step of the process that touches a contactless payment must be enabled to process that payment. 

All terminals must be equipped with an appropriate application from the acquirer that allows the terminal to handle contactless payments and recognize the contactless reader.  Contactless readers and their software should be "type approved" by the payment brands, or minimally be in the process of being approved.  In addition, electronic cash register (ECR) and POS system software may need to be updated to identify contactless payments.

All hardware and software must be certified with the acquirer and/or processor for each type of transaction accepted at the POS.  In order to ensure proper interoperability between the contactless payment device and the contactless reader, it is important to only implement certified contactless readers.  The merchant processor/acquirer must also be certified by the payment brands to process the payment messages.

In addition, current payment terminal receipt printing processes may have to be changed.  When transactions do not require a signature or when merchants are using electronic signature capture, the signature line on the receipt must be suppressed.  A method for printing receipts when a stored value (gift) card is used may also need to be identifed.  Merchants should work with their processors to determine parameters for gift card and other stored value programs.

Training Requirements
To implement contactless payments successfully, employees must be trained.  Training should focus on the benefits of using contactless payment and be provided to both management and personnel who deal directly with customers.  It is critical that employees know how the contactless payment equipment works, what brands are accepted, and what to do if there is a problem.  Ideally, employees should be advocates for contactless payments and should be able to educate customers.

Marketing Requirements
A good marketing plan is critical to successful implementation of contactless payments.  Marketing partners can include issuers, acquirers, processors (especially for gift cards and other closed-loop payment devices), technology providers, and payment brands.  Through such partnerships, merchants may be able to leverage a partner's national, regional, local and in-store marketing initiatives.

Marketing campaigns should be designed to drive consumer awareness and use of contactless payments.  Materials available at the POS can also help consumers understand that contactless payments are accepted. 

Identify Support Requirements
As part of the planning process, a support team needs to be esta
blished and processes must be designed to support a fully-deployed system. 
Support includes ongoing training, testing, deployment of software updates to the contactless readers and marketing support.  As new types of contactless payment devices are released (for example, new form factors), training materials will need to be updated.  In addition, store managers and staff will need to receive information about new issuers and devices promptly. 

Sites at which contactless payments are implemented should be tested at random (for example, by mystery shoppers), to ensure that quality is not being compromised and that the customer process has been implemented as planned.

Testing Contactless Payment Implementation

Before broadly rolling out contactless payments, it is highly recommended that merchants run a pilot project to perform end-to-end testing on all transactions and processes in a controlled environment with continuous monitoring. 

Planning the Pilot Project
Pilot projects typically test and validate equipment, transaction processing, troubleshooting procedures and training and support processes.  A pilot test plan should be created that tests all relevant components and establishes goals and objectives for the pilot.  These goals and objectives should be used to select one or more locations at which to run the pilot project.  Vendors and partners needed for the pilot project must also be identified.

Installing the Equipment
All equipment required to run the pilot must be installed in each chosen location. Terminals or readers in locations should be installed where they can be easily accessed by the customer and must be mounted permanently, to avoid movement and damage.  All cables and wires must be connected securely and tightly to avoid disconnection.  After installation is complete, end-to-end validation of all types of transactions accepted should be performed, with all involved parties touching each type of transaction. 

Running the Pilot Project
Prior to running the pilot project, all managers and employees should be trained on how to use the new contactless payments terminal or reader, how contactless payments work, what brands are accepted and what to do if there is a problem. 
While running the pilot project, all problems, opportunities, and solutions that are encountered at each pilot location should be recorded.  The information obtained during the pilot should then be integrated into a rollout plan.

Rolling Out Contactless Payments

The final step in implementation is to roll out contactless payments at all planned locations.  Like all other steps, successful rollout requires a plan.  The plan should include the following information:

  • How many sites will implement contactless payments, in what order, and over what period of time.
  • How to test each installation as it "goes live" (for example, providing installers with test cards to confirm successful installation).
  • What training tools will be provided to each site as contactless payments are deployed.
  • What marketing strategies should be executed simultaneously with rollout.
  • If a reloadable spending card (a gift card) is issued, whether to activate all cards at rollout. 


A new era of payment has begun in the United States, thanks to the introduction of contactless payments.  Contactless payments are safe, fast, and convenient and provide benefits to consumers, merchants, and issuers.  Contactless payments also open the door to additional merchant creativity and differentiation.  They support new form factors and value-added applications based on the mature card industry.

Contactless payments represent the most important card payment innovation in the last decade, with early adoption on the part of many major card issuers and top-brand merchants, and investments by and cooperation with the payment brands.  Millions of contactless payment cards and devices are being issued, the number of accepting merchant locations is increasing rapidly, and consumer usage is steadily increasing.

Over the coming year, significant growth is expected in the adoption and use of contactless payments in the United States.  Consumers enjoy their convenience, and merchants realize faster checkout times and increased throughput.  The value propositions offered by contactless payments are clear.

About the Smart Card Alliance Contactless Payments Council

The Contactless Payments Council ( is one of several Smart Card Alliance technology and industry councils.  The Contactless Payments Council was formed to focus on facilitating the adoption of contactless payments in the U.S. through education programs for consumers, merchants and issuers.  The group is bringing together financial payments industry leaders, merchants and suppliers.  The Council's primary goal is to inform and educate the market about the value of contactless payment and work to address misconceptions about the capabilities and security of contactless technology.  Council participation is open to any Smart Card Alliance member who wishes to contribute to the Council projects.



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