Each contactless payment card contains a tiny microchip and coil. Contactless payment terminals generate a magnetic field around them. When the payment card is brought close enough to the magnetic field, the coil enters the magnetic field of the terminal, causing electromagnetic induction. The voltage generated by electromagnetic induction will provide power to the microchip. Without this process, called "inductive coupling," each contactless payment card would have to be powered by a battery, which would add bulk and weight and eventually drain the charge. Because the power is supplied by the terminal, contactless payment systems are also called "passive systems".

If the contactless payment card has power flowing in from the terminal, the processor transmits information to the terminal at a frequency of 13.56MHz. This frequency is chosen because it is suitable for "inductive coupling" and can withstand Environmental interference is not easily absorbed by human tissue, and the processor's built-in instruction set can "encrypt" data during transmission.