Contactless Payments: Unlocking the Future of Payments in Nigeria

For many years people consider ‘contactless payments’ nothing more than a buzzword that experts in the payment industry float around. However, recent trends have proven that contactless payment is more than just a buzzword, it’s a reality - our reality. A few weeks ago, the Central Bank of Nigeria (CBN) announced the guidelines for contactless payments in Nigeria, confirming the introduction and adoption of this payment method in the country.  So it’s time to give your business an edge by leveraging contactless payments. In this post, we’ll be discussing what contactless payment is, how to use this payment method, its examples, and benefits. 

What is contactless payment?

As the name implies, a contactless payment method doesn’t require contact between the bank card or digital wallet app used to make payments and the POS reader used to receive payments. Unlike the normal credit/debit cards which require swiping or inserting, payers only need to bring their card or device in proximity to the POS to complete payment. This is why it is called contactless payment or proximity payment.  

This payment method is powered by NFC (near field communication) technology, using radio frequency identification (RFID). This radio frequency enables the smartphone or card to communicate with the POS or payment reader when in proximity.  

How does contactless payment work?

With contactless payments, consumers will experience seamless payment for their goods and services with their RFID technology-enabled cards, or other devices that don't require swiping. While these payments are transmitted through cards and smart devices, they’re still run by financial institutions, similar to how conventional credit and debit card payments work. The mechanics for this payment may vary slightly depending on whether you’re using a card, wearable, or mobile wallet to make payment, but here’s a generic breakdown of how it works:

The customer moves the card or device in proximity to the POS terminal

Information from the card is transmitted via the RFID wireless chip.

The payment terminal makes a payment request to the bank or financial institution that issued the card.

The financial institution approves or denies the transaction. This is subject to several factors such as credit limit, bank balance, etc. 

The transaction is complete once the card issuer approves the payment request.  

Examples of contactless payment

Contactless payments are mostly available through financial institutions and banks, however, that hasn’t stopped the big tech companies from jumping on it and offering their version of this payment method. Currently, the most popular example of contactless payment globally is Apple Pay and Google Pay.

Apple launched its digital wallet for contactless payment in 2014, called Apple Pay. Most Apple devices today are pre-equipped with this app that allows users to store debit/credit card information on their device - iWatch or iPhone - to make payments at stores more seamless and convenient. All the users have to do is hold their device up to the light on the payment reader while placing their finger on the ‘Touch ID’ button to verify the payment. These users are also able to make online purchases with this stored information and easily transfer funds to family and friends via text message through the Apple Pay wallet. 

Google Pay is another example of contactless payment introduced in 2011 on their compatible devices with NFC technology. It allows customers to make payments at physical stores and online retailers using a secure payment method on the Google Pay app. Instead of receiving the credit card information of users from Google, the retailer receives an encrypted number attached to the payment card of the user.   

Advantages of contactless payments

It’s understandable if you’re already asking the question of how contactless payments in Nigeria would benefit you and your business. Gladly there are many ways that you and your business can benefit from this payment method:

Enhanced security 

The common misconception around contactless payment is that people think that it’s unsafe. However, that’s untrue. Each payment is authenticated with a uniquely generated one-time code, making it difficult to breach, and thus, enhances the security of this payment method. The information on each card is encrypted, making it impossible for unauthorized actors to log in and use the card information. 

Hassle-free transactions 

Contactless payment increases the speed of payments as customers don’t need to swipe or insert their card and enter their pin, etc. when making payments. This saves time and makes payment seamless, straightforward, and convenient. Customers also know they don’t have to carry cash around, all they need is their card or smartphone/wearable device and they can make payment conveniently. 

Operational efficiency

Operational efficiency is another benefit your business is going to reap from adopting contactless payment. Not only does contactless payment improve checkout speed, it also increases customer satisfaction and also protects your business against fraudulent charges. 

The only disadvantage of this payment method, which is also considered the danger of contactless cards is that if users lose their cards, malicious persons can use it for fraudulent transactions since it doesn’t require a PIN at the payment point. 

FAQs about Contactless payment 

1. Is contactless payment safe?

Contactless payment is a very safe payment method. For every transaction, an encrypted one-time code is generated that is almost impossible for fraudsters to hack and duplicate. However, you need to keep your card safe at all times and prevent theft because once it’s stolen, it can be used for fraudulent transactions since it doesn’t require a pin. 

2. What if a merchant’s POS terminal doesn't enable contactless payment?

In this case, your contactless card can also work as a traditional card that requires you to swipe or insert it into the POS terminal to perform a transaction. So, the lack of a contactless POS terminal doesn't make the card redundant. 

3. Is there a limit to daily transactions for contactless payments?

No. There’s no daily limit to the number of transactions you can make. That’s at your discretion. However, it’s possible that your provider asks you to manually re-enter your PIN frequently to verify your identity and reduce the chances of fraud or theft.

Conclusion

Contactless payment in Nigeria is not as futuristic as it’s sounded for so long, and it’s definitely not a buzzword. It’s here and only a matter of time before it receives full-scale adoption. However, you can position your business to start reaping the benefits of this payment method early and it starts by understanding contactless payments and how it works.