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Our guide on NFC payments explains what they are, how they work, how safe they are, and why your business should accept them.
What is an NFC payment? There’s a good chance you’ve heard the term even if you haven’t used the technology yourself.
The appeal of NFC’s convenience factor among consumers is easy to understand. Payments processed using NFC-enabled mobile devices appear to be on course to account for more than $130B in consumer retail purchases worldwide.
Near-field communication (NFC) technology has ushered in an era of secure and convenient payment transactions for both consumers and businesses of all sizes.
Read on to discover everything you need to know about NFC payments and why alternative payment options, including NFC, represent the future of contactless payment processing.
Table of Contents
An NFC payment is a financial transaction made between two devices within very close proximity. For example, using your iPhone at point of sale by holding it near a credit card terminal. Many credit and debit cards are now also equipped with EMV chips that can be tapped against a terminal to make a transaction, and most of the best POS systems will accept these payments.
NFC stands for near-field communication, a technology that lets customers and merchants process payments between two devices that are in close physical proximity to one another. NFC uses wireless, contactless communication protocols called radio-frequency identification, or RFID, to identify transponder tags attached to other objects, such as card readers and terminals. RFID technology uses a reader with an onboard power source and antenna to talk with and transfer data to a transponder tag.
NFC allows contactless cards like those in your smartphone to make secure transactions and exchange content when they’re near each other or a terminal with NFC capabilities.
So how do you use NFC technology? NFC devices, which are based on RFID protocols, can work as powered readers and transponder tags within short-read range parameters. NFC technology deploys in three different forms: tag reader and writer, device-to-device, and card emulation:
Merchants, generally, will need to invest in a card terminal or reader that has NFC capacity. The good news is NFC capabilities are becoming a more and more standard feature in card readers and terminals.
You may be wondering how much this will cost you. You’ll be happy to hear that accepting NFC transactions doesn’t cost any more than accepting a standard dipped credit card transaction. The cost is entirely in the hardware, so it’s a one-time expenditure. If you’re due to update your POS systems, it’s probably worth upgrading to NFC-capable hardware.
Smart devices and NFC-capable EMV credit/debit cards can communicate with an NFC-enabled POS system to complete a transaction:
In general, merchants and customers can expect to see two different types of commonly used NFC mobile payments: pay app-enabled payments and “tap-to-pay” payments. Check out the following list for more details on each payment type:
While the technology isn’t foolproof, it’s about as safe as dipping an EMV-chipped credit card into a POS terminal, which is currently the gold standard for credit card transaction security. They’re considered on par with dipped EMV chips in terms of security. Merchants will be happy to know NFC payments are treated like EMV transactions for purposes of liability and EMV compliance. This means, as a business, you’d rather see a customer make an EMV transaction than swipe their credit card through a magnetic stripe reader.
Using a process called tokenization, card numbers are, in fact, never stored in an app or anywhere on an operating system. Instead, they are replaced with a “token” — essentially a secret, one-time-use number — after the credit or debit card has been added to a mobile wallet. Hackers can’t easily access useful information from terminals even if they manage to hack them, especially if all your transactions use NFC or EMV payments. On top of that, smart devices get a second layer of encryption through forms of two-factor authentication, such as passcodes, face ID, and push notifications.
There’s essentially no risk (other than the initial investment) to accepting NFC payments and quite a bit to gain.
Let’s sum up some of the benefits of NFC payments:
Pros
The number of major retailers that are adding NFC capabilities continues to grow every day, with the trend having accelerated during the COVID-19 pandemic due to increased interest in contactless payments.
If you’re wondering if you need NFC, the answer is: if you don’t already, you will soon enough. You can probably get by on your current EMV-compatible readers until it’s time for your next upgrade, but at that point, you’ll strongly want to consider adding NFC capabilities to your POS systems.
Do you want to learn more about mobile wallet payments and credit card readers? Visit our complete guide to mobile credit card readers for a deeper dive into payment card readers, terminals, and POS systems, as well as all of the associated functionalities that are most important to your business’s continued growth and success.
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