What type of data does a contactless reader commonly process?

A contactless reader commonly processes radio wave signals from cards, which is indeed the correct explanation. This technology leverages near-field communication (NFC) or RFID (radio-frequency identification) to transmit payment information wirelessly between the card and the reader. When a contactless card is brought close to the reader, it sends its payment data using radio waves, allowing for quick and convenient transactions without the need for physical contact.

In the context of electronic payments, this method offers numerous benefits, including enhanced speed during transactions and a reduced physical interaction, which can be particularly beneficial in environments where hygiene is a concern or during peak hours in retail settings. Contactless technology is widely used in various payment cards, mobile wallets, and devices equipped with NFC capability, further emphasizing its prevalence in modern transaction methods.