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What are contactless payments and how do they work?

6 min read

The way we pay for things is constantly evolving, with new ways of paying for goods and services popping up all the time. So it may feel like some of the more established ways of paying, like contactless payments, have been with us forever. But this revolutionary way of making payments has actually only been part of our lives since 2007. Since then, it has become a staple of business thanks to its quick and convenient method of making payments on the move.

So, what’s the current limit for a contactless payment, and what gadgets make these transactions possible? Discover more about how they work, how to pay contactless and more in our handy guide.

What is a contactless payment?

A contactless payment provides a quick way of paying for a product or service in a physical setting. Unlike a traditional card machine, which requires the customer to input a Pin, they hold their bank card, smartphone or other contactless device within four centimetres of a contactless payment machine.

The machine can then use information transferred to complete the transaction. These machines often make a beeping sound to show the payment has gone through.

They’re called contactless payments because a store’s point-of-sale (POS) terminal doesn’t have to come into direct contact with the customer. That made them particularly popular during the Covid-19 pandemic, when shop workers and the public were encouraged to reduce physical contact.

The use of contactless card terminals has become increasingly popular over the years in general, however. And the trend looks set to continue. By 2021, 32% of all payments were made using contactless cards, according to UK Finance. By 2031, their annual usage is projected to reach 19.4 billion payments.

How do contactless payments work?

Here’s how to do a contactless payment in three easy steps:

  1. The customer looks for the contactless symbol at the till or in the shop window. This shows that the business uses contactless payment devices.
  2. They hover their card around four centimetres from the reader, usually for a couple of seconds. Alternatively, they can do the same with a smartphone or smartwatch that’s linked to their card.
  3. The contactless card reader should beep or show a green light or tick once the payment has been successful.

What devices can you use to make contactless payments?

In the digital era, it’s not just bank cards that can make contactless payments. Customers have more choice than ever before when it comes to gadgets and different payment tools. Here are the most common types of contactless payment solutions:

  • Contactless bank cards. The use of contactless card payments continues to surge as Brits take full advantage of their convenience and flexibility. Back in 2015, only 3% of all payments were accounted for by contactless cards, according to UK Finance. But the figure reached 19% in 2018, before jumping again to 32% during 2021.
  • Wearable technology. From bracelets and keychains to fobs and jewellery, there are lots of stylish ways to make a contactless payment. These gadgets can easily be linked to the user’s card or bank account to make payments.
  • Mobile contactless payments. Smartphones and smartwatches on platforms like Apply Pay and Google Pay use passcodes, face ID and fingerprint scans for authentication. This removes the need for a physical bank card. Apple Pay is available on selected Apple devices, and Google Pay on selected Android devices. In both cases, retailer limits may apply.

Pros and cons of contactless payments

Contactless technology has potential pros and cons, whatever type of business you operate. These include:


  • Speeds up payments at the checkout.
  • Improves hygiene, with less physical contact required.
  • No extra processing fees to pay.
  • Meets the expectations of digital-savvy customers.
  • A contactless phone payment means a physical bank card isn’t even needed.


  • Security risks – with no Pin to enter, thieves could take advantage of stolen cards.
  • Lack of trust. Less digitally aware customers may prefer more traditional payment methods, which means you need to offer both options.
  • Spending limits apply, meaning not every purchase can be contactless.

What is the limit for contactless payments?

The payment limit for contactless transactions in the UK currently stands at £100. Before October 2021, the limit was much lower, at just £45. And prior to the first Covid-19 lockdown, it was only £30.

Some mobile payment platforms allow limitless transactions, though not every retailer accepts these types of digital wallet payments.

Why is there a contactless payment limit?

The purpose of the contactless payment limit is to prevent or reduce fraud. If your card was stolen, the limit means a perpetrator would not be able to make a large contactless payment. And repeat transactions would alert your bank to possible fraudulent activity.

You can make five contactless payments in a row before you are required to enter your Pin. If there is suspicious activity on your account, your bank may ask you to confirm that the transactions are legitimate.

What technology do contactless payments use?

Contactless payment technology works slightly differently, depending on whether it involves a traditional bank card or a mobile device. Here’s how some of the technology works.

What’s the process for bank cards?

A contactless payment involving a credit or debit card uses radio frequency identification (RFID) technology. It means a contactless card comes with a built-in antenna and chip that emit radio waves. The contactless terminal in a shop receives a signal from the card that helps to process each payment.

How does a mobile contactless payment work?

Mobile contactless payments use near-field communication (NFC) technology, which builds on RFID. From smartphones to smartwatches, each mobile device includes a chip that enables the digital transfer of information from the gadget to a contactless card reader.

Are contactless payments safe?

Understandably, not everyone likes the idea of walking around with a bank card that could be stolen and used with a simple tap on a payment device. However, contactless payment cards are more secure than you may think.

Contactless technology compares favourably with magnetic-stripe cards. These date from the 1960s and contain easily replicable data, since key information is stored on the stripe itself.

So, are contactless payment solutions safe? Not completely. That’s because no bank card or payment device can prevent all unauthorised payments by itself. But remember, contactless payments are authenticated, and the ever-changing data is difficult to hack. Plus, you can always use Chip & Pin alongside contactless payments if you’d prefer to mix and match payment methods.

Related content

Want further information about how to pay contactless? Take a look at our other guides:


This has been prepared by Tyl by NatWest for informational purposes only and should not be treated as advice or a recommendation. There may be other considerations relevant to you and your business so you should undertake your own independent research.

Tyl by NatWest makes no representation, warranty, undertaking or assurance (express or implied) with respect to the adequacy, accuracy, completeness, or reasonableness of the information provided.

Tyl by NatWest accepts no liability for any direct, indirect, or consequential losses (in contract, tort or otherwise) arising from the use of the information contained herein. However, this shall not restrict, exclude, or limit any duty or liability to any person under any applicable laws or regulations of any jurisdiction which may not be lawfully disclaimed.

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