How does a contactless card reader process transactions?

Record numbers of customers are now using contactless card readers to pay for items. But how do they work for your business when it comes to processing payment?

A record proportion of debit card payments by customers were made using a contactless card reader in August, according to the latest stats by UK Finance.

In total, contactless payments accounted for 62% of all debit card transactions, an increase of 7% compared to July.

Just under half (45%) of all credit card transactions were contactless in August, up 14.6% compared to the previous month.

The record levels of contactless payments, coming about when restrictions were lifted for the UK’s first lockdown coupled with an increased £45 spending limit, further highlights why businesses need to update their payment processes to include a contactless card reader.

The vast majority of shoppers are now using contactless to pay for items.

Many now also believe that the £45 spending limit is still too low.

But from a business standpoint, how can you be sure you benefit from this rising tide of contactless payments?

And how does a contactless card reader actually process transactions and make sure you get paid?

In this blog, we’ll tell you.

What you need to use a contactless card reader


A contactless card reader - you obviously need the contactless card reader to accept payments. The latest card payment machines accept all major debit and credit cards, along with digital payments and mobile wallets.

A business bank account - you can link your business account to your merchant account to receive final payments to your business.

A merchant account - to accept contactless payments you need to have a merchant account. This is essentially a holding account where money from contactless transactions is held before being authorised and deposited into your business account.

Two people in a market paying for eggs via phone contactless payment

Shop showing card and online payment options

How a contactless card reader works and processes transactions


Contactless card readers are fitted with a chip that emits radio waves which can “communicate” with a similar chip installed into payment cards and mobile devices that incorporate digital wallets.

When a customer taps their payment card or device against the card reader the chip in the reader connects with the card and processes the transaction.

The process is a pretty simple one:

  • The payment information is captured and routed through the card network to the customer’s bank which issued the card for approval
  • The customer’s bank checks the payment details against the customer’s bank balance and the payment is approved if they have sufficient funds (if they don’t have the funds the transaction fails)
  • If the payment is approved, the funds are moved over to the merchant account to await the final settlement
  • The funds are deposited into your business bank account (usually within three working days)

Apart from the final deposit of funds into your account, this whole process takes a few seconds to run.

If the customer doesn’t have the funds available, then the transaction simply fails - so you can be totally confident that you’ll receive the money into your business for all approved transactions.

Getting your business future-ready with a contactless card reader

With record numbers of shoppers turning to contactless card readers to pay, it is clear that businesses which haven’t already started need to update their payment methods to include contactless payments.

If you’re already using a contactless card reader, are you sure you’re getting the best deal you can?

Are you suddenly paying extra fees on top of what you were told you’d be charged?

Have you started thinking it’s not worth the investment?

Get in touch with Handepay and we can figure out how to either get you started with a contactless card reader, or get you on to a better deal.

In most cases, we’ll even pay your cancellation fee if your current provider tries to charge you for leaving before the end of your contract.

If you’re not ready to talk to us but are still wondering if you could save money on your card reader, take our Price Challenge and let’s see how much you could save if you do decide to switch

Financial disclaimer:

Terminal hire contracts are provided by Merchant Rentals Limited, who is authorised and regulated in the UK by the Financial Conduct Authority (FCA) for Consumer Hire under FRN 720500. Terminal hire can be for consumer hire and non-regulated hire contracts. Please check your contract carefully for details. Regulation of all consumer hire fall under the control of the FCA.

Handepay Ltd is authorised and regulated by the FCA for Consumer Credit under FRN 673564. Handepay is a credit broker for consumer hire not a lender.

Handepay acts as an introducer of card acquiring services on behalf of EVO Payments UK, the card acquiring service provider. EVO Payments UK is the trading name of EVO Payments UK Ltd, a payment institution that is authorised and regulated by the Financial Conduct Authority (FRN number 959332).

Existing Cards Businesses- The one-month rolling terminal hire contract from Merchant Rentals is only available to businesses that are switching from their current acquirer to EVO Payments UK arranged through Handepay.

New to Cards Businesses- The 12-month terminal hire contract from Merchant Rentals is only available to businesses that are new to card payments and wish to receive acquiring services from EVO Payments UK, arranged through Handepay.

The Next Day Banking Settlement service provided by EVO Payments UK incurs an additional fee of £4 a month on top of your acquiring service charges and fees. Provided your card machine performs a reconciliation before 12am (midnight), you’ll receive settlement of funds the next banking day.

Editorial disclaimer:

The information we provide does not constitute financial advice and might not apply to your business. Always carry out research into your business’ needs when choosing a new merchant services provider.

Sometimes, we link to other third-party websites to provide you with additional information. At the time of publication, we consider the information accurate, however, we do not have control over their content and are not responsible if any information on these websites change.

The products we display on our website are for illustrative purposes only - if your business requires additional facilities, you may receive a different model than advertised.

All of the information contained on this website, including fees, services and functionality, are correct at time of publishing. E&OE.

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