Please ensure Javascript is enabled for purposes of website accessibility

A Practical Guide to Operationalizing Contactless Cards

The COVID-19 pandemic has accelerated the use of contactless cards as a safer, cleaner, and faster mode of payment than other ‘traditional’ methods. In the age of “contact-free” transactions, contactless cards do not require to be inserted into any swiping machine, nor do they need customers to enter any confidential PIN to complete the transaction. Rather, they offer complete convenience to users who simply need to hold, wave, or tap their card on a contactless-enabled card reader. For retail businesses or merchants, the advantages of contactless cards lie in their ability to let their customers pay quickly while maintaining social distancing.

The growing popularity of contactless cards is evident from the fact that 79% of global card users and 91% in the Asia-Pacific region are now using tap-and-go modes of payment. In fact, over half of millennial and Gen Z consumers say they may avoid shopping from a place that does not provide a contactless point-of-sale (POS) facility. In a previous blog, we have shown the benefits and value of such cards. But obviously, just knowing what they are is only the first step.

The key question is, how can banks, credit unions, and financial institutions provide a frictionless payment experience in a world of growing contactless card usage?

Let’s look at what card program managers must be aware of while operationalizing contactless cards.

How do contactless cards work? 

Diedre Davis of MSUFCU talks about the multiple benefits of contactless cards as a “faster, easier, and more secure” mode of payment. She adds, “a typical contactless payment takes one or two seconds to complete, as compared to 45 seconds for cards with chips.” The cards seem to be easy enough to issue as well. In fact, all that MSUFCU needs for issuing contactless cards is for their users to “let us know they’d like one.”

How are contactless cards faster? For a start, contactless payments are based on the Near-field frequency (or NFC) technology that can establish a connection within a distance of 10 centimeters from the card reader. Further, radio waves from the NFC chip can establish faster connections and exchange encrypted data, thus making the contactless transaction more secure and faster.

What makes contactless payments more secure? In addition to encrypted data, contactless payments generate a unique code for every transaction. As the customer’s payment and personal information are not captured by the POS device, contactless cards are more secure than magnetic stripe payments.

Adding to its many user benefits, confidentiality is now possible with contactless cards with users not required to share their personal information.

How are contactless cards beneficial for banks and card issuing companies?

Following the advisory issued by the World Health Organization (WHO) about the dangers posed by cash transactions, contactless payments became more widespread as a safer mode of payment. Mastercard reported a 40% jump in contactless payments in April 2020, while over 50% of Americans said they intended to use contactless cards.

How are contactless cards beneficial for card issuing companies? Here are some of the benefits:

Increased financial transactions

The convenience of the “tap-and-go” system over traditional payment methods means that consumers are likely to use their contactless cards more often. For card issuers, this means the benefit of increased transaction value and repeat purchases.

Cash displacement

As contactless cards have replaced cash at payment counters, the banks and financial institutions find it easier to keep track of their transactions. With digital data in place, banks require lesser staff for storing data and account keeping.

Reduced customer attrition

As customers switch to this faster and safer payment process, there is likely to be a remarkable decrease in abandoned sales. This is preventing card users from switching to competitor payment solutions.

What are the challenges before contactless card issuing institutions? 

Besides the immense benefits, card issuers also need to overcome many challenges associated with contactless payments, including the following:

Lack of awareness of contactless payments

A significant proportion of global consumers are either unaware of contactless cards or feel hesitant about adopting them. The 2021 Global Payments report states that cash was used in 20.5% of global POS transactions in 2020. For higher adoption of contactless cards, financial institutions need to raise awareness and educate their customers about the benefits of contactless payment.

Lack of trust

Many consumers still do not perceive contactless cards as a safe payment mode. Moreover, due to security concerns, most countries have set a limit on the amount of money that can be spent on each card transaction. Biometric technologies can be one solution to amplify the security of contactless cards.

Technology backend

Banks, financial services institutions, and credit unions are still largely wedded to legacy technology systems across the front and back end as well as the transaction processing systems. Moving to contactless cards calls for enhanced agility on the part of these companies. It’s not just about enabling a one-time move. Contactless cards are being seen as the vanguard of a new generation of digital solutions that will be forced upon banks by the newly digital-native customers. As such solutions take root, the legacy systems will be found wanting as they hold up innovation, slow down go-to-market, and increase maintenance efforts and costs.

What does the future hold for contactless cards? 

Evolving consumer behavior along with the rapidly changing market conditions indicates that contactless cards are likely to remain relevant in digital payments, even in the post-pandemic world.

While contactless cards have been around since 2007, they have gained mainstream acceptance since March 2020. According to a recent Visa report,  the overall use of contactless cards in the U.S. has increased by 150% since March 2019.

Despite growing acceptance, industry experts believe the U.S. is still lagging with contactless payments. Over 50% of transactions in Europe are contactless as compared to less than 20% in the U.S.

Nevertheless, contactless payments are all set to grow from 100.4 million units (in 2019) to 184.5 million units in 2024. More than 88% of POS terminals could become contactless by 2024.


The COVID-19 pandemic has scaled the use of contactless cards over cash and traditional cards. After all, it is a safer, more hygienic, and convenient option. The demand for contactless cards is likely to increase in the future, which could also allow the card issuing companies to expand their customer base and grow their business.

At CoreCard, we provide the technical solutions and services to facilitate the processing of credit card transactions. With years of experience in designing and implementing technical solutions for contactless cards, our team can help a card issuing company at all stages of their project deployment.

To learn more about our contactless card processing solutions, contact us now.

Leave a Comment

Your email address will not be published. Required fields are marked *

Scroll to Top