What are contactless payments?

Holly Thomas / 13 February 2015

Spending on contactless cards more than trebled over the last year to reach a record £2.32 billion in 2014. What are contactless payments? How do they work? Will cash payments disappear?



Spending on contactless cards more than trebled over the last year to reach a record £2.32 billion in 2014, according to official figures from the UK Cards Association.

Last year, 10 contactless transactions took place every second with the average purchase being £8.26.

The increase in popularity has prompted the UK Cards Association to increase the maximum amount for which you can pay for goods simply by waving your card over an electronic reader from £20 to £30.

How does it work?

Contactless cards, which were launched in 2008, allow customers to make payments without having to enter a Pin. You can only pay in this way if your card and the retailer has contactless capability.

If your card is contactless it will have a small logo on it, which looks very similar to the wi-fi symbol. This same logo is also displayed on payment terminals that accept contactless payments.

When you come to pay, you need only to hold the debit or credit card within a few inches of a payment device, which reads the card and processes the transaction. It’s a lot quicker than using Chip and PIN.

Who uses it?

Using the cards for modest purchases is popular in coffee bars, newsagents and chemists, and in London, on the Tube and buses.

For now, contactless is most commonly used in and around the capital, but it is spreading through the UK. Retailers have introduced contactless because it speeds up customer handling and reduces queues.

WH Smith, Waitrose, Boots and Pret A Manger are among the retailers using the technology. So far Tesco has introduced contactless into all 500 of its stores within the M25. The Co-op and Waitrose have adopted the technology in some shops.

Could cash disappear?

The Payments Council, which oversees all payment services in Britain, predicts that 400 million fewer cash transactions will be made this year than last. Meanwhile, the number of cashless payments will surge by 700 million.

Mark Bowerman, from the Payments Council, said: “We anticipate this year to be first year that non-cash transaction volumes overtake cash transactions. However, we are not expecting cash to disappear anytime soon.”

This will be music to the ears of those who still favour cash. Contactless or indeed card payment is not liked by everyone and campaigners are urging companies to consider the wishes of their customers, who would like the choice of how they pay for goods and services.

Some companies have stopped accepting cash payments

Many businesses are phasing out cash payments to help cut their own costs. Car parks are among them, opting to convert payment machines to card only.

Paul Green, Saga's Director of Communications said: “Car parks should be designed around the users, not just for the convenience of those that run them. Whilst older age groups are the fastest growing users of technology, there are some who do not use mobile phones on a regular basis, and others who simply prefer using cash.

“Technology should be used to help liberate, not limit, individual choice. Both young and old should have the option to pay in a way that suits them.”

How safe and secure are contactless payments?

The opinions expressed are those of the author and are not held by Saga unless specifically stated.

The material is for general information only and does not constitute investment, tax, legal, medical or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.