Tap on phone (or tap to phone as Visa calls it and tap to mobile for Amex and Discover) is a contactless payment method where customers tap a seller’s smartphone instead of a credit card machine to pay. You may also hear this referred to as "SoftPOS" short for software POS. In other words, a POS system that doesn't need special hardware; it just needs the POS software and a phone or tablet to work. In this article, we’ll go over contactless payments and specifically SoftPOS / tap on phone.
What are contactless payments?
As noted in the introduction, contactless payments are credit card transactions where a customer uses either a contactless-enabled credit card or their smartphone with a credit card securely “stored” in a digital wallet to make a purchase. They simply hold (or tap) their card or phone to the contactless reader on a credit card machine to complete the transaction. This is done instead of swiping a magnetic strip or “dipping” an EMV chip card.Is contactless the same as a chip card?
The technologies are different, but most chip cards are also contactless enabled. Near-field communication (NFC) enables contactless payments using radio frequencies at close distances to transmit and receive data. You can determine if a credit card is contactless by looking for a small symbol showing a series of lines in a slight arc. CapitalOne provides this example:How common are contactless payments?
Mastercard states that 2 out of every 3 transactions processed on its network are now contactless, up from less than 1 out of 3 in 2020. It’s highly likely that the Covid-19 pandemic, which drove many forms of low- or no-contact interaction, helped accelerate the adoption of contactless payments.What is tap on phone?
Tap on phone is a relative newcomer to the contactless payments space. Available for a few years, it has slowly gained visibility. Instead of requiring your customers to tap their cards to a credit card terminal, they can actually tap their cards to your phone. As you can imagine, this is not a payment experience you’ll typically use in a traditional retail environment. However, it could become more popular with businesses that take cards on the go. Business owners could offer tap on phone at tradeshows and pop up shops, food trucks, delivery services, or at other small businesses that don’t have standard credit card processing equipment. Many of those businesses already use their smartphones for accepting payments, usually through dongles that plug into the phone’s headphone jack. This is the next evolution of smartphone payment acceptance. Instead of a small business owner swiping a card through the reader attached to their headphone jack, the customer would simply tap the card to the business owner’s phone. As with other phone-acceptance methods, you’ll have the option to email or text a receipt to your customer, meaning you won’t have to lug around a receipt printer.How does it work?
Tap on phone / SoftPOS uses near-field communication (NFC) to enable a contactless payment transactions. You’ll install a SoftPOS app from any compatible credit card processor and use your merchant account with that processor to accept contactless cards using your smartphone or tablet. The apps offer the latest security and technology, including encryption to protect cardholder data. Card details are not stored on your phone.What's the difference between tap on phone and SoftPOS?
Nothing. They're two different terms for the same general concept: any solution that lets you take contactless payments directly on your off-the-shelf smartphone or tablet, with no additional card readers or hardware. Instead, your phone is the “hardware.”Is tap on phone safe?
Yes, tap on phone is a safe payment acceptance method. Like other forms of contactless payment, it uses tokenization and encryption to maximize security. The data exchanged between a card and the smartphone accepting the payment will be encrypted. That means that it’s ‘scrambled’ so that it’s unusable without decryption keys even if a hacker could intercept it. With tokenization, your actual card details are replaced with a unique, one-time-use “token” specifically for that transaction. Even if the data is intercepted, it can’t be used for other transactions or to access card information. Additionally, as with using a card reader in a headphone jack, card data is not stored on the phone. Lastly, NFC itself is already low risk, as the transmission between devices can only occur over very short distances (usually inches or less). That minimizes the chances of data interception.Costs to Accept Tap on Phone
Tap on phone is considered a “card-present” transaction and your processor will charge card-present rates. It should not cost anything additional beyond your usual processing costs to accept tap on phone payments. However, rates and fees for card-present transactions vary considerably. There are a few important factors that play into your cost, including your industry, average monthly volume, and average transaction size. Some small businesses will benefit from flat rate pricing (such as Square) while competitive interchange plus pricing will be more cost-effective for other businesses. If you need help determining the right solution for you, check out our article on credit card processing pricing models or sign up for a free CardFellow account.Do all credit card processors offer tap on phone?
No, not yet. While both Visa and Mastercard support tap on phone, it’s still up to individual processors to offer the service. Tap on phone requires a mobile app, which not all processing companies have developed. Processing companies that specialize in on-the-go payments for smaller businesses are the most likely to have an app available for tap on phone. This includes big names like Square and Stripe, which both offer tap on phone for Android, and Clover, which offers tap on phone for iPhone. However, other companies may also be able to offer it. If tap on phone is a priority for you, be sure to check with your current processor or get a free account at cardfellow.com to find the right processing company.Tap to on Phone for iPhone
Apple touts its ability to enable tap on phone technology, but in reality, any NFC-capable phone with a tap on phone compatible app can accept a contactless payment. On its website, Apple states that in order to use its tap on iPhone option, you would still need a supported app, and lists options that include Zettle, Clover, and others.Benefits of Tap on Phone
The biggest benefit of tap on phone is that you don’t have to purchase any credit card processing hardware. While the invention of Square and other headphone jack or Bluetooth card readers already offered a more affordable hardware option, tap on phone effectively drops it to zero. You can use your existing smartphone (provided it’s NFC-capable) to accept payments without any other hardware. It’s true that you could do that with Square and other mobile options by keying in card details, but keyed transactions (as a “card not present” transaction) are more expensive than swiped or contactless transactions. That means that tap on phone provides both the benefits of hardware-less payment acceptance and the lower card-present transaction costs.Are there any drawbacks to tap on phone?
From security and cost standpoints, no. Tap on phone / SoftPOS is as safe as other methods of accepting payments and doesn’t (or shouldn’t) cost anything additional to accept. (If your processor charges you more to accept tap on phone, it’s worth looking for a new processor!) One potential drawback is customer perception. If customers feel uncomfortable with making a payment through your smartphone, they may not like the tap on phone option. However, many customers have gotten comfortable with phones as a payment terminal over the past couple decades, as devices like Square became ubiquitous. Another drawback is that tap on phone only supports NFC (contactless) payments. If you have customers that use magstripe or chip cards that aren’t NFC-capable, they will need a different way to pay. You could either request cash in that case, or have a backup method (such as a secure headphone jack reader or Bluetooth reader) to accept the non-NFC card. Lastly, one potential drawback is that these SoftPOS apps for tap on phone will generally not have many integrations with other systems like full POS systems do. This includes inventory systems, CRMs, and accounting software. That means you may need to do more manual reconciling between your transactions and those other systems. It’s also important to note that the SoftPOS app you use for tap on phone card acceptance will use your phone’s battery up more quickly than you may otherwise with just standard texting and phone calls. It’s a good idea to keep your charger handy so that you can make sure you’re ready to take payments and don’t miss out on a sale due to a dead battery.How do I get started with tap on phone for my business?
At the end of the day, SoftPOS apps could be a good option for your business. Traditional retailers and restaurants, or those businesses that prefer full-function POS systems, may not want to utilize tap on phone. But for others, it offers a low-cost, easy way to take payments using devices you already own. SoftPOS apps are already built in to many popular processing companies’ platforms, and we expect to see more offered in the future. It’s unlikely that phones will completely replace traditional payment terminals and POS systems, but for businesses that don’t need those features, SoftPOS can be a great fit. If you’re looking for a tap on phone solution, the first question is “are you working with a processor already?” If so, you can start with that company and determine if they offer a compatible tap on phone app. If they don’t or if you don’t have a processor, you’ll need to find one. The easiest option is to use a credit card processor comparison service, such as CardFellow, which will show you real quotes for your specific business. It’s free to use and completely private, so there are no sales calls or pressure to buy. You’ll simply compare processors, ask questions through a secure message system, and determine the right option for your needs. Give it a try at cardfellow.com!
Ben Dwyer
Ben Dwyer began his career in the processing industry in 2003 on the sales floor for a Connecticut‐based processor. As he learned more about the inner‐workings of the industry, rampant unethical practices, and lack of assistance available to businesses, he cut ties with his employer and started a blog where he could post accurate information about credit card processing. As the blog gained in popularity, Ben began directly assisting merchants in their search for a processor. Ben believes in empowering businesses by providing access to fair, competitive pricing, accurate information, and continued support. His dedication to transparency and education has made CardFellow a staunch small business advocate in the credit card processing industry.
