Contactless payment systems are transaction processing systems that use contactless smart chip technology, according to Smart Card Alliance. Contactless payment systems enable transactions where the payment device does not make physical contact with the point-of-sale terminal.
Smartphones are the most common contactless payment device, states Near Field Communication. Compatible smartphones use radio frequency identification, or RFID, technology to communicate with the point-of-sale terminal using through secure channels and encryption. Contactless payments have security features on par with credit cards. While the user's PIN and signature are not typically required to complete a transaction, the cashier may require manual PIN input during high-value or frequent purchases as a precaution against theft or fraud.