Cashless Payment: The Future of Transaction

Photo by Nick Statt / The Verge

Amazon Go was founded in January 2018. And it has marked the beginning of a new era. The era where people no longer need to bring cash to purchase something. The era of contactless payment. Some people call it “tap-and-go”

As of 2019, Amazon Go has opened 18 stores across the U.S. Sooner or later, Amazon Go will grow rapidly and spread all over the world. When that happens, more and more businesses will follow suit. And in the end, cashless payment will be the future of transactions.

How does it work?

Contactless payment is a method of payment that is done digitally using a card or smartphone, so you don’t have to bring physical money. Examples of contactless payments include debit cards, credit cards, smartcard, transit cards, Apple Pay, Android Pay, and Google Wallet.

Transactions are made using RFID or NFC technology. Here’s how contactless payment works:

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  1. A card or smartphone is placed near a contactless payment terminal within 4 cm. 
  2. The terminal reads the chip on the card or the code on the phone. Then, it transmits the data to the card-processing network like Mastercard and Visa.
  3. The network then does a fraud analysis on the card. Once done, a confirmation will be sent to the card issuer.
  4. The card issuer confirms that the card isn’t stolen and have enough fund to carry on with the transaction.
  5. The merchant’s terminal then receives the confirmation.
  6. The payment is approved, and all of this is done within 3 seconds or so. 

The pros and cons of cashless payment

Just like any other thing, cashless payment has its own benefits and drawbacks. Let’s take a look at the benefits and drawbacks of this technology.

Benefits

Less waiting time and queue

Restaurants and brick-and-mortar stores traditionally have a long queue and waiting time. By implementing cashless payment, those businesses can speed up the payment process. It means less waiting time and queue for the customers. Less waiting time would result in more customer satisfaction.

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More rewards

Tap-and-go cards are always closely associated with rewards and loyalty programs. Take the Starbucks card as an example. Spending $1 at the giant retail using the card will earn you 2 points. If you reach a certain point, you’ll get a free beverage as a reward. Contactless payment is a great way to keep the customers coming.

A simple means of transaction

Contactless technology simplifies the transaction process. You don’t need to carry cash or a wallet anymore every time you want to buy something. Just bring your cards, stickers or use your mobile wallets.

Drawbacks

Limited amount of transaction

Contactless payment doesn’t require you to enter your PIN or put your signature every time you buy something. Because of that, the transaction amount is limited to smaller purchases to avoid scams and fraud. The actual limit varies between different countries and issuers. For instance, Mastercard’s limit is around $100 per transaction

Difficult for older people

One of the most challenging factors that prevent the full use of contactless technology is the older generations. They may have a hard time understanding how the tech works. Some of them don’t even have a bank account!

Harder to keep a track of spending

By having cash in your wallet, you can create a budget for the day. For instance, you have $100 in your pocket. You can allocate $10 for gas, $30 for groceries, $50 for eating out, and the rest goes to savings. That’s not the case with a cashless wallet. Because it’s so convenient to use, people are more prone to overspending and breaking their budget.

Tips for going cashless

If you want to go cashless, there are several things that you always have to remember:

  1. If you use an iPhone, wipe out all of your financial data using the “Find My iPhone” app in case it goes missing. 
  2. With Android Pay, your actual data is safe because the credit or debit card number is never transmitted. Instead, they use a virtual account to represent your account information. So, no worries there.
  3. Keep track of your spending by either using prepaid cards, setting up spending notifications or simply limiting yourself from overspending.  

Wrap up

Amazon Go is a living example of what the future looks like. A world where you can shop around without carrying any cash and without having to wait in a long queue. 

With that being said, contactless payment still has a long way to go. Here’s why:

  • Some people, especially the older generation, are not yet ready for this change. 
  • There are still many things you can buy only with cash, take a street vendor as an example. 
  • Some argue that paying with cash is a lot safer because you don’t need to worry about data breaches and hackers.

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