Contactless Payment vs. Online Payment: The Comparison Your Food & Drink Business Needs

February 1, 2023
One2 Guide

Demands for contactless payments and online payments have exponentially increased. Visa research found that more than 60% of customers would prefer a business implementing a contactless payment method if product line, price, and other factors were similar. According to Statista, the digital payment segment has grown twice in size. 

But on the other hand, these two systems do not share the same roots and purposes. Learn all about them and how they differ here.

Contactless payments

1. What is contactless payment technology?

Contactless payments (sometimes referred to as touchless payments, tap-and-go, tap-to-pay, or scan-to-pay) are payments processed with no direct, physical contact between your employees and patrons. They operate through payment cards, QR codes (quick response codes), virtual wallets, or other devices. And to communicate with readers, these systems usually use either RFID technology (radio frequency identification) or NFC technology (near-field communication). They do that at a distance of about two to four inches for secure payments.

1995 observed the first widespread use of touchless payment. At that time, the Seoul Bus Transportation Association in South Korea issued a UPass card (aka contactless payment cards) for commuters. Contactless cards were used for the first time in the United States in 2004.

2. How do contactless payments work? 

Contactless payment is an extra simple process. As mentioned above, you can have it processed through QR codes, credit and debit cards, or virtual wallets (e.g., Apple Pay) on mobile devices, thanks mainly to technologies RFID and NFC. 

What is NFC?

NFC connects the mobile device to the eatery’s POS (point of sale) system. From there, the two devices can communicate through an encrypted signal, and the payments are processed almost instantly. 

What is RFID?

Contactless payment cards use RFID technology. Generally, the card emits radio waves for communication with the point-of-sale terminals and then payment processing.

What are credit and debit cards with contactless technology?

They have an embedded small chip that creates RFID. This enables the ability to communicate with the payment processing system and complete card transactions.

What are QR codes?

One2's instant contactless QR code menu

Also called scan-to-pay, they are the simplest form of touchless ordering and payment. Food businesses tend to display tents or cards on tables with a QR code on them. Scanning the code with their smartphone cameras allows diners to access your online ordering menu, place their order as if they are ordering delivery, and pay. 

3. What are the benefits of contactless payments?

- Reduce fraudulent transactions

- Enable more convenient transactions with options for anyone

- Speed up transactions

4. How to accept contactless payments?

To accept this payment method, a merchant usually gets a POS terminal with a contactless symbol indicating the RFID technology. This hardware tool enables payment processing from the credit or debit card and physical payment location. It is in the hardware that software for card data encoding and payment acceptance is implemented. To obtain this payment terminal, you need to set up a merchant account with a merchant-acquiring bank. 

Online payments

1. What is online payment? 

Also called electronic payment, an online payment accepts electronic purchases for a digital transaction. Happening on online platforms like apps and websites, it enables customers to pay in various payment methods such as contactless credit cards, mobile payments, and cryptocurrencies. For this type of payment, a physical presence of a card is not required but its data is. 

1994 saw the Stanford Federal Credit Union credited as North America’s first financial institution to introduce its online banking services to customers. And the first e-commerce transaction was thought to be for a pizza from Pizza Hut. 

2. How does online payment work?

- The diner enters their payment information - for example, the debit card, into an online checkout form that allows the ability to pay for something.

- The payment gateway sends that data to the payment processing systems - for instance, Stripe.

- The payment processor forwards that data to a card scheme like Visa.

- This payment network checks with the guest’s bank to see whether the card is blocked and whether the diner has enough money to buy.

- Should the payment be accepted, the money is taken out of the guest’s bank account and held by the restaurant’s payment processing system.

- The restaurant and diner receive sale confirmation from the payment gateway.

- At the end of the trading day, the payment processor sends the money from all the restaurant’s sales to their bank account.

3. What are the benefits of this contactless transaction?

- Reduce fraudulent transactions

- Reduce human resources’ need

- Enable more convenient transactions with options for anyone

- Speed up transactions

- Reach a wider range of consumers (not just online but offline)

- Improve customer retention rate (e.g. using email address data for email marketing and customer satisfaction measurements)

4. How to accept electronic payments?

To accept this type of payment, you need to obtain a merchant account including merchant services for the entire payment acceptance. This account can be issued by:

- Acquiring banks. Owing to their long contracts and relatively high fees, they suit bigger businesses better. 

- Payment service providers. These payment providers enable a full payment cycle implementation on a merchant’s platform. 

- Payment gateway service providers. Presenting a payment gateway technology, they facilitate online payments.

Online payment vs. Contactless payment methods

1. Contactless payment

- Merchant account needed: Yes

- Merchant account issuer: Merchant acquiring bank

- Hardware needed: Yes

- Security features: Yes - You can select a specific spending limit for your contactless payment systems to prevent fraud.

2. Online payment

- Merchant account needed: Yes

- Merchant account issuer: Merchant acquiring bank or payment service provider

- Hardware needed: No

- Security features: Yes - You need trusted payment providers that are properly secured with fraud prevention services and follow security standards.

Reliable payment method platform for small and large food & drink businesses

Online ordering with One2 that uses Stripe to offer the best payment experience

Offering payment processing services, Stripe enables both in-person and online businesses to accept payments digitally and concurrently prevent fraud thanks to its Radar protection. It supports more than 135 currencies and payment methods and provides 100% uptime. Plus, this platform integrates with the popular menu management and online ordering system One2

Online and contactless payments improve the efficiency and effectiveness of your restaurant operation. Using QR codes and Stripe, One2 technology enables these types of payment. Besides, it can empower you to minimize labor costs, increase customer engagement and loyalty, and boost sales

Related questions

1. What is Google Pay?

A mobile payment service by Google, Google Pay powers online and contactless purchases, allowing users to pay with Android phones, watches, or tablets.

2. What is Apple Pay?

A mobile payment service developed by Apple Inc., Apple Pay enables users to pay in person, on the web, and in iOS apps. This technology is supported on Apple devices (Mac, iPhone, iPad, and Apple Watch).

3. What is Samsung Pay?

A digital wallet and mobile payment service developed by Samsung Electronics, Samsung Pay allows users to pay with compatible phones and other devices produced by the brand.

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