Contactless payments for small businesses: How to accept them without a card reader

Published Friday 26 September 2025

Table of contents

• What is contactless payment?
• Where contactless payments fit into your workflow
• How do contactless payments work?
• Benefits of contactless pay
• Common mistakes to avoid with contactless payments
• Accept contactless payments with Xero
• FAQs on contactless payments

Key takeaways

• Contactless payments are when your customers pay with their cards, but without swiping or dipping them.The customer just holds their card or mobile device near your reader, and the payment is made.
• Most modern point-of-sale systems accept contactless payments.
• You can accept contactless payments anywhere just by using your mobile phone.
• When you take contactless payments with the Xero Accounting app, the transaction instantly syncs with your Xero accounting records so your books are up to date.

What is contactless payment?

Contactless payments (also called tap to pay) are when a customer pays by holding their card or mobile device near a reader. They do not need to insert the chip or swipe the card in the reader – they just hold their card, phone, or smartwatch near the reader to complete the transaction.

Most point-of-sale (POS) systems now take contactless payments, but with the right app on your mobile phone or tablet, you can use them to accept contactless payments too.

Where contactless payments fit into your workflow

If you're on-site at your business, you might use a POS system with a card reader that can use contactless pay. But now, you can also accept contactless payments through your mobile phone regardless of where you are. You can use your mobile to accept payments in a physical location – great for businesses like restaurants, where customers want to pay on the spot without having to walk to a check stand. It’s cheaper than a POS system, too.

Contactless payment technology is even more useful for contractors, personal trainers, and others who travel to deliver services, If you have mobile payment options like tap to pay set up on your phone, you can generate an invoice and get your client to pay you on the spot

Contactless pay is also great if you're temporarily taking your business on the road – to a conference, trade show, or festival, say.

How do contactless payments work?

Contactless payments use radio frequency identification (RFID) to send data between a credit card, debit card, or phone and a card reader. The reader generates a short-range radio signal that both phones and cards recognize.

Here's what happens:

1. Proximity – the payer holds their NFC-enabled card or device near the payment reader
2. Induction – the payment reader generates a small electromagnetic field
3. Power transfer – the electromagnetic field induces a current in the customer’s card or other device.
4. Data exchange - the payment reader and the card or mobile device exchange information using radio waves
5. Verification – the transaction gets verified using biometrics

Curious about the technology? The Consumer Protection Financial Bureau (CPFB) has research on the role of big tech in contactless payments.

Benefits of contactless pay

Contactless payment options bring plenty of benefits to both small business owners and their customers.

Security

Contactless pay is completely secure. The information transmitted between the card and the card reader is encrypted so that it cannot be intercepted.

The card or phone doesn't use the customer's account number, or the card’s expiration date or three-digit CVV. Instead, the token it generates completes the transaction without transmitting any sensitive account holder details.

Convenience

Contactless pay is convenient for both customers and small businesses. Customers with their mobile wallet set up on their phones don't have to dig for their credit cards – and it's even easier with a smart watch. And if they use a card, tapping is often easier and more reliable than dipping a chip or swiping a worn-out strip.

Business owners don't have to count change or deal with cash – they can just accept customer payments wherever they are. The funds get transferred seamlessly to their bank accounts without extra work or hassle.

Frictionless payments

Contactless payments remove friction from the customer experience – it’s easier for customers to pay you and easier for you to get paid. A safe and quick payment experience means customers are less likely to walk away from a purchase, too.

Cash flow protection

Contactless mobile payments also help you manage and protect your cash flow. your cash flow. You no longer have to accept cash or risk payment delays or non-payment by writing an invoice – contactless payment lets you collect payment immediately after service.

Common mistakes to avoid with contactless payments

To get started with contactless payments smoothly, avoid these common mistakes:

You don’t need the most expensive technology

Using phones or tablets to process payments can save a lot of money, compared with investing in a POS system right away.

Use different payment processors in store and in the field

You can use a standard POS system and card reader in your brick-and-mortar store and then switch to your mobile device for more convenience when you’re out of the office.

Let your customers pay the way they want

Don’t accept just cash or checks when away from your desk – you’ll limit your cash flow. Let your customers pay you the way they want to.

Don’t worry about safety

Contactless payments are safer than checks and easier to handle than cash.

Sync your transactions with your accounting software

A payment processing system that syncs with your bookkeeping records keeps your financials up to date and saves you time and energy on manual updates.

Accept contactless payments with Xero

To accept contactless payments on the go, you just need your phone and the right app. Xero partners with Stripe to offer Tap to Pay through the Xero Accounting mobile app. If you have a Stripe account, you can easily accept contactless payments through your mobile phone.

To start, create an invoice in the Xero Accounting app. Then tap “Accept payment”. Present the phone to your customer, and let them tap it with their card. It takes just microseconds to complete the transaction, which then syncs to your accounting records instantly.

Here’s more about accepting payments online with Xero.

FAQs on contactless payments

Still have questions about tap-to-pay technology? We've got answers.

What is the best type of small business payment processing?

The best option depends on your needs. It should allow you to collect payment in the fastest, most efficient way possible, regardless of where you are. For people who frequently work in the field or away from their main office, the best option tends to be mobile payments with contactless pay integrated.

What's the difference between contactless and mobile payment?

Contactless payments are made between a card reader and a card or mobile device – you hold the payment method, like your card, close to (or tap it against) the card reader. Mobile payments, however, are any payments received through a mobile device, which may include contactless payments, swiped cards, or typed-in cards.

Are contactless payments secure?

Yes. When someone uses their card to make a contactless payment, the card doesn't send its number to the card reader. Instead, the card's chip generates a single-use code, called a token. That means if someone intercepted the code, they would not be able to use it – the token applies to that specific transaction only, and it will never work anywhere else again.

Do consumers like contactless payments?

Yes, they do. Most consumers enjoy the ease of contactless payments, and they expect to be able to use contactless payments when paying for goods or services. Contactless payments are also reassuring for customers because they don't have to hand their physical card to the business's employee, and it stays within their sight at all times.