Tap to Pay: What It Is and How It Works

Since the first plastic credit card was issued by American Express in 1959, payment tech progress has been growing exponentially. Magnetic stripe payments enjoyed a 30-year reign between the ’70s and ’90s. EMV chip card technology had a good two decades or so, beginning in the mid-’90s. And the winner of the 2010s and beyond is the NFC-powered, contactless sensation that is tap-to-pay.

Contactless payments became a must-have during COVID. Most modern card readers and payment terminals are NFC-equipped. But tap-to-pay is transcending that plastic card of the last 60+ years. NFC technology is in the midst of an evolution. Customers are driving digital advancements, and savvy small business owners should be aware of what’s to come.

In this article, we’ll dive deeper into the tap-to-pay movement, where it is now, where it’s going, and how businesses can implement tap-to-pay for smooth, future-proof card transactions.


  • The 2010s marked the era of NFC-powered contactless payments, and unlike its predecessors, this technology has the sticking power to take it beyond our traditional plastic cards.
  • NFC payments are faster, more secure, and more versatile than any other payment solution we have seen before
  • Implementation is smooth, and the possibilities go far beyond accepting payments. Tap-to-pay technology will take us to advanced loyalty, marketing, and end-to-end customer satisfaction solutions.
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History of Tap to Pay

Although contactless payments weren’t widely adopted until the 2010s, the technology actually dates back to 1995. In Seoul, South Korea, the Seoul Bus Transport Association introduced the UPass, a contactless payment card that commuters could tap on as they entered the bus. Almost ten years later, the US tried the technology, and it was four years after that when all EMV cards became NFC-equipped.

Despite the tap technology being available on most major cards, it was the smartphone advancements that really pushed consumers to adopt it. Tapping their phone to a terminal proved far more exciting than tapping the card.

Google was the first, in 2011, to enable contactless payments via their mobile app. Apple Pay caught up in 2014; in 2015, the wearables market made everyone aware of the tap’s potential.

Once the thought of the tap was there, the behavior followed. In 2015, many merchants switched to NFC-enabled terminals; by 2019, most banks were issuing contactless cards.

How Tap to Pay Works

Tap-to-pay, whether used with a contactless card or a smart device, operates through Near Field Communication (NFC) technology. This short-range wireless communication technology allows data exchange between devices close to each other, typically within a few centimeters.

NFC operates on radio-frequency identification (RFID) principles and electromagnetic induction, enabling communication between devices without needing physical contact or Wi-Fi connectivity.

Here’s how it works:

  1. NFC-enabled devices: The customer’s payment card (credit, debit, or mobile wallet app) and the merchant’s payment terminal must be equipped with NFC technology.
  2. Close proximity: The customer holds their NFC-enabled card or smartphone close to the merchant’s NFC-enabled terminal to make the payment.
  3. Data transmission: The NFC antennas in both devices communicate with each other. The customer’s payment information is securely stored in the NFC chip and transmitted to the merchant’s terminal.
  4. Authentication: The payment terminal validates the transaction by sending the payment details to the payment network (such as the card issuer—e.g. Visa, Mastercard, and the customer’s bank) for authorization.
  5. Secure transaction: The payment network verifies the transaction details, ensuring sufficient funds and confirming the transaction’s authenticity. A unique, one-time code is generated for that specific transaction if approved.
  6. Completion: The transaction is completed, and the customer receives a payment confirmation. The entire process is fast and secure and does not require physical contact between the card or smartphone and the payment terminal.

Safety and Security

Within the NFC transaction process are encryption protocols to secure the data being transmitted. These protocols ensure that the data exchanged between devices is encrypted and cannot be easily intercepted or tampered with. The authentication methods verify each party’s identity before exchanging sensitive information. This prevents unauthorized devices from participating in transactions. In addition, many NFC transactions often use dynamic data, meaning that a new, unique code is generated for each transaction. This dynamic data makes it difficult for attackers to reuse intercepted information for fraud.

Despite the thorough processes embedded in this transaction type, merchants still play a role in enhancing security through considerations like:

  • Only using EMV-compliant terminals
  • Ensuring network connections are secure
  • Implementing tokenization via their payment processor
  • Regularly updating software
  • Monitoring transactions
  • Implementing strong access controls.

Customers can also take precautions to protect their information when using NFC, particularly when using it through a mobile device. These include:

  • Using secure devices
  • Enabling device lock
  • Only using official payment apps
  • Turning off NFC when not in use
  • Using strong authentication
  • Only enabling NFC on a secure internet connection.

Tools compatible with contactless payments

Contactless cards are most commonly used for contactless payments, but smartphones, smartwatches, and other smart mobile devices (even implants) are now enabled with this technology through their digital wallets.

Contactless cards

All cards today can come contactless. There are contactless credit cards, debit cards, and even gift cards. If it has a contactless symbol such as a checkmark or four curved lines indicating a communication frequency, it’s NFC enabled and can be used in-store wherever the merchant has an NFC reader.


Apple’s iPhone and Apple Watch use Apple Pay.


Google’s Android devices use Google Pay, and Samsung’s Android devices use Samsung Pay.

These are all enabled through the respected devices’ payment app, where the cardholder can store their card information on their phone or device to enable secure contactless transactions.

Benefits of Using Tap to Pay

During the pandemic, the number one benefit of contactless technology was the simple fact that it is contactless. No contact, no germs. But the benefits made known during that time were more aligned with the original reason for its development.

It’s faster

Contactless technology speeds up the payment process. Rather than “dipping” the card into the machine, merchants can quickly pass the reader close to the customer. The customer taps the card, and the transaction is complete. NFC devices facilitate the fastest and most convenient data exchange available today.

It’s secure

NFC transactions are secure due to the short distance over which they occur. Moreover, NFC devices can be secured with encryption and authentication protocols that ensure the confidentiality and integrity of the transmitted data, such as the cardholder’s personal information and card number.

It’s universally compatible

Unlike the chip card and magnetic stripe, NFC technology is standardized. This ensures compatibility between different devices and applications. Standardization enables seamless integration of NFC into more devices, including smartphones, tablets, payment cards, and other smart gadgets. It can power a payment future beyond our current plastic cards.

It’s versatile

One way to verify the longevity of a technology is to look at its usability outside of the obvious application. Businesses are using contactless loyalty cards and even loyalty apps that allow customers to store those loyalty cards digitally. Interactive marketing lets customers tap NFC-enabled promotional material to access offers, discounts, and product information. Beyond retailers and accepting payments, NFC is used for public transport, access control systems, smart advertising, data exchange between devices, and interactive gaming. NFC even enables smart packaging to provide customers with product and usage information at the point of sale.

How Businesses Can Implement Tap to Pay

The tap-to-pay revolution is here, and it’s not going anywhere. Any SMEs not yet on board should be looking to change that soon. Here’s how:

Research and choose the right vendor

Many different POS (point of sale) providers offer contactless payment capabilities. There will be a long list with a search online, but not all providers suit all businesses. There are a few options.

Full-service POS and credit card payment providers

Full-service providers like Stax offer complete POS solutions and backend payment processing, which are essential to accepting contactless payments.

At the front end (the POS), all-in-one providers like Stax offer hardware, software, and additional services tailored to specific industries. Stax specifically is POS agnostic, allowing merchants to use any preferred POS hardware, unlike many POS specialists that force merchants to use theirs only. Then, they also handle payment processing services in the backend, ensuring seamless transactions by securely authorizing and settling payments.

These types of all-in-one providers often have direct relationships with card networks, allowing for competitive transaction rates.

Specialist POS providers

Specialist POS providers, such asSquare, offer simple solutions, often appealing to smaller businesses and individuals. The emphasis is on user-friendly interfaces and quick setup. They may lack some advanced functionality but often have low entry costs, making them attractive to small businesses with limited budgets.

Some specialist POS providers offer payment processing services but do not have direct relationships with the card networks. At the entry-level, their fees are low, but once businesses are processing high volumes, these often work out much more costly than full-service providers.

Payment aggregators

Payment aggregators, such as PayPal, have a unique system that doesn’t require businesses to set up a merchant account. Instead, PayPal and other aggregators group all of their clients’ transactions into one. This makes businesses sub-merchants under PayPal’s own merchant account.

Aggregators are appealing for their convenience, but they can be very expensive for merchants processing a high volume of transactions.

Evaluate costs, fees, and customer support

Providers often have different costs and plan structures as they serve different types of businesses. Full-service providers like Stax use flat-rate subscription pricing, which keeps fees low when businesses process high volumes. However, subscription pricing may seem high for businesses with a low transaction rate. So always run the numbers and consider your transaction volume when selecting a merchant service provider. 

Fees, too, differ among providers. Cheap vendors often have hidden fees. Look out for:

  • Transaction fees
  • Chargeback fees
  • Monthly minimums
  • Statement fees
  • Gateway fees
  • PCI compliance fees
  • Upgrade and support fees
  • Cancellation fees
  • Additional hardware costs.

Once the provider is identified, the steps are simple.

Upgrade or purchase necessary hardware

As technology advances quickly, even merchants with NFC-enabled terminals or readers should look at whether theirs is up to date. There may be a need for additional infrastructure, like Wi-Fi or data connectivity, which is not essential for the transaction but is necessary for some of the advanced features this technology offers.

Train staff

To achieve the smooth process promised by contactless card or mobile payments, staff must know how to use and troubleshoot the system. Formal training helps bring everyone up to speed, developing super users who can use the technology and effectively educate customers on the benefits.

Promote the new payment option

The extra security offered by NFC technology is a great benefit to customers. It should be promoted and used to emphasize that customer privacy and security are important. This message will bode well for building loyalty. It may also be worth offering promotions and incentives to encourage the initial usage of this technology, especially for businesses that plan to utilize NFC loyalty cards or other NFC-enabled solutions.

Regularly review and update the system

Providers will regularly update software to improve services. These improvements then flow onto customers and merchants alike. Keeping the software updated ensures it will run for optimal security and performance.

Finally, it’s worth soliciting customer feedback to learn what they think of these NFC-enabled solutions. This insight can inform how advancements in this technology may be used to improve business offerings. 

The Future is Tap to Pay

The era of traditional payments is coming to an end. Tap-to-pay has ushered in a new direction for the payments industry.

For almost a decade, tap-to-pay has offered seamless, secure transactions that can be made in seconds with the wave of a hand. That convenience and advanced security capabilities have solidified this technology as the go-to payment method.

NFC technology has already given businesses the tools to introduce tech-advanced payment solutions, from mobile wallet payments to digital loyalty programs on both cards and phone apps. For those that it benefits, this technology can extend to in-store NFC promotions and pioneering packaging that takes customers straight to the information they need at the moment they need it.

Tap-to-pay is the future, and Stax Payments offers the front and backend tools to power this progress.

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FAQs about Tap to Pay

Q: What is tap to pay?

Tap to pay is a contactless payment method that allows customers to pay for goods and services by tapping their contactless credit or debit card, smartphone, or wearable device on a contactless card reader. Tap to pay uses near-field communication (NFC) technology to transmit payment information securely between the customer’s device and the merchant’s terminal.

Q: How does tap to pay work?

Tap to pay works by using NFC technology.

To use tap to pay, the customer simply holds their device near the contactless card reader for a few seconds. The payment information is then securely transmitted to the merchant’s terminal, which processes the payment and authorizes the transaction. Once the transaction is complete, the customer receives a confirmation message on their device.

Q: What devices support tap to pay?

Tap to pay works across multiple devices including smartphones (iPhones and most Android devices), smartwatches, credit and debit cards, transportation cards, and more. 

Q: Is tap to pay secure?

Yes, tap to pay is generally considered secure. It has a number of security features to protect financial data, including tokenization and encryption. NFC is also a secure form of payment because it works at a very short range. This means it’s hard for someone to intercept your payment information without the customer’s knowledge.

Q: How do you use tap to pay?

If you’re a merchant you can implement tap to pay by partnering with a payment service provider that supports tap to pay. Depending on your provider, you may need to install a contactless payment-capable card reader or terminal at your point of sale. These devices are equipped with NFC (Near Field Communication) technology, which enables them to communicate with customers’ payment devices, such as smartphones or contactless cards.

As a customer, you can use tap to pay by holding your payment device (e.g., phone, smartwatch etc.) near the merchant’s card reader. The NFC antennas in both devices communicate with each other and transmit the customer’s payment information. The transaction will go through once the payment has been authorized, verified, and approved.