The Advantages of Contactless Remittance Services in a Post-pandemic World

COVID-19 changed the way we perceive the world forever. Every aspect of life underwent numerous changes, including how we make payments. When social distancing became the norm, the pandemic predominantly accelerated the shift towards digital and contactless solutions across all industries globally.

What is contactless payment?

Contactless payment is the process of wirelessly completing a financial transaction where the purchaser brings a secure token, such as a chip-equipped bank card or a digital app on a smartphone, near the merchant’s POS (point-of-sale) terminal. These payments primarily leverage radio-frequency identification (RFID) or near-field communication (NFC) technology to interact with the terminals and require the secure token to be within approximately two to four inches of the reader. This ensures that the holder is making the payment deliberately. 

Benefits of contactless payments

1. Enhanced Security:

The security of contactless payments is highly appealing since customers do not directly provide their payment or billing details to the seller. Communication between devices is encrypted, and transactions are secured with a unique, one-time code for each purchase. In the event of an intercepted wireless communication, the thwarted data would only include the one-time transaction code specific to that transaction, rendering it useless for further malice. 

Although having a soft transaction limit may compromise the convenience contactless payments offer, it simultaneously enhances security. It minimizes the risk of significant losses due to unauthorized use, addressing a common worry about contactless payments: increased theft in the absence of physical verification methods. 

2. Convenience and Speed:

Contactless services authorize instant or near-instant transfers, ensuring faster access to funds for recipients. Often making it the best payment option during emergencies or time-sensitive needs.

3. Accessibility:

Making payments has become very easy with rapid digitization. All you need is a stable internet connection to utilize mobile apps and pay to anyone from anywhere. This is particularly useful to migrants or those who do not have access to traditional remittance services.

4. Transparency:

With API (Application Programmable Interface) technology and cutting-edge UI/UX, developers are building robust and responsive apps with greater transparency and tracking features. This cancels out confusion and delays within the payment process and helps build trust between senders and receivers. 

5. Increased Financial Inclusion:

Contact payments are a boon to a larger share of unbanked or underbanked populations, especially in rural areas where there are limited banks or ATMs. For them, contactless payments are providing a secure and convenient way to send and receive money, fostering greater financial inclusion in the global economy.

Different Types of Contactless Payment Solutions

1. Contactless Cards

The look and feel of ‘Tap to Pay’ cards are similar to traditional credit or debit cards and are the most common mode of contactless payments. What differs is inside these cards, an antenna is embedded to enable the wireless communication feature with a suitable reader. These cards also have chips and magnetic strips to provide the flexibility of using them traditionally, like swiping and ATM withdrawals. Rest, the security systems and data protections emulate traditional cards and are par with them. 

2. Mobile Apps and Wallets

Another popular mode of contactless payments is payment apps, and the only prerequisite for leveraging it is that you should have a smartphone and an internet connection. You have to download the payment application on your phone. Then, you need to link the app with your bank account with an OTP verification. You are all set to use the app. 

At the point of sale, there will be a QR code. It is a kind of barcode containing information in a grid of black and white squares, commonly used to encode web addresses or other data, and a smartphone’s camera can scan it. QR codes will encode the merchant’s payment details in a payment-related context. Then, the app prompts you to enter the amount, followed by a request to authorize the payment with your secret PIN. The transaction is complete. 

A digital wallet, an e-wallet, or a mobile wallet is a virtual payment system or application that acts as the digital counterpart to your physical wallet. This tool allows users to safely store various digital versions of payment methods, like credit and debit cards, gift cards, boarding passes, event tickets, passwords, and vouchers, for easy access and usage through smartphones or smartwatches.

For transactions in POS, users usually wave their smartwatch or smartphone, equipped with a payment feature, near a contactless payment reader. Before this, one should download the related payment app on their smartphone and link it with bank accounts. The related process applies to smartwatches, it is essential to link them with credit or debit cards before initiating payments. The main difference between a mobile wallet and an app is that the former doesn’t require you to enter your secure PIN to complete payments every time and is technically the closest we get to mimicking physical wallets. 

Cons of contactless payments

1. Potential security concerns:

The fact that contactless payments don’t require any personal authorization makes them easy prey for theft and misuse. Thus, it becomes extremely important that one doesn’t misplace their payment instruments. 

2. Extra charges:

Users, at times, may have to pay extra charges for transactions at merchant outlets while using certain PPIs like digital wallets. These norms are usually set up by government bodies or regulators.

3. Trust and technical knowledge:

The senior citizen age group may not find contactless payments particularly appealing because operating them requires ample technical knowledge, For instance, let’s take the scenario of loading a digital wallet with money. They still may require external help and may not enjoy the full independence or flexibility digital instruments offer. Secondly, merchants should have payment acceptance systems supporting contactless payment instruments at their outlets, which is not feasible for small business owners.

Conclusion

Contactless payments improved the convenience of digital payments. At the same time, it is not devoid of potential threats. Still, the pros outweigh the cons, and contactless payments will see wide adoption with time. If you are looking to send money abroad from India, choose moneyHOP, India’s first neo-bank, which offers near-zero forex markup for international transfers. The brand is one of the most sought-after for education, travel, and family maintenance cross-border money transfers in the nation.