NFC Mobile Payment Explained: How Contactless Payment Works with NFC Technology

NFC (Near Field Communication) is a well-established contactless technology widely used in digital payments across Europe, the Americas, and Asia. This technology allows devices placed within 4 cm of each other to exchange encrypted data in real time. Devices that utilise this technology include card terminals, mobile phones, and contactless cards.

With this new technology, you do not have to insert a card or input a pin; you only need to tap your debit/credit card on the card terminal to complete the transaction. Aside from the convenience it offers, NFC payments are now popular because they are highly secure, encrypted, and contactless. Keep reading to find out how NFC payments work, how to accept NFC payments, and many more.

How NFC Payments Work

The NFC payment process is pretty straightforward. Once the payment device and the reader are activated and close to one another, the NFC chips trade encrypted data to complete the payment. This process completes in under a second and supports frictionless, secure checkouts. As a result, many people are adopting this technology as their preferred way to pay.

Although the process is straightforward, there is a bit of technicality that goes on in the background. For instance, the wireless/contactless connection between both devices makes use of radio waves similar to RFID (Radio Frequency Identification) labels used in warehouses, stores, and other wireless tracking apps. These chips typically use a specific RFID frequency, which is 13.56MHz, that can only work when both chips are in very close proximity.

To ensure security, most mobile wallets require biometric or PIN verification before initiating an NFC transaction. Aside from that, NFC readers can only connect to one payment device at a time. That way, a nearby customer cannot accidentally pay for another person’s purchase. Additionally, customers can store several credit/debit cards on their mobile, reducing the need to carry multiple cards in their purses or wallets. This reduces the risk of physical card loss and enhances wallet-free mobility for users.

How to Accept NFC Payments

To start accepting contactless payments, a few setup steps are required. For a start, you need to have an NFC-enabled reader in place. Aside from that, your credit/debit card processing plan also has to accept digital e-wallet payment (most merchant account providers let you do this. Processing fees for NFC payments are typically similar to standard card-present transactions, but may vary by provider and region. However, the actual pricing might vary depending on your selected merchant account and plan.

Benefits of Using NFC Payment Technology

This payment method comes with numerous benefits, and even from the previous sections, you would have noticed a few benefits noted. However, here are a few of other benefits you will enjoy with NFC payments.

Faster Contactless Checkout Process

With NFC payments, one thing is guaranteed, and that is a faster checkout process. According to a report from Mastercard, contactless payments are 10 times faster than other in-person payment options.

Convenient Mobile Payment Experience

NFC payments allow users to pick the option they are comfortable using. That way, you get to pay with your most convenient and trusted wallet. Another report shows that 40% of consumers prefer digital e-wallet payments, while 37% prefer contactless card options.

Seamless Communication via NFC Technology

When you choose NFC payments and activate the process, your mobile device or card communicates seamlessly with the reader. In a few seconds, the process is completed.

Increased Security for Every Transaction

this wireless approach offers better security compared to swiped card payments. Moreover, NFC payments have contributed to the reduction in credit card fraud worldwide.

Versatility Across Payment Methods and Devices

Another benefit is support for transactions with not only payment systems. You can make a payment with a simple tap.

What Is NFC Used For in Payment and Beyond?

NFC was initially used for basic file sharing, but today it's more commonly applied in payments, authentication, and automation. As a result, the technology is now used for many other purposes, highlighted below.

Cashless and Contactless Payments

One of the most notable things NFC is used for is making instant payments. As it stands, many top payment services like Paykassma, Google Pay and Samsung Pay among others now utilise NFC technology for cashless payments in many countries worldwide. With most of these services, users simply need to add their card numbers to the app to make NFC transactions.

Unlocking Car Doors and Smart Homes

Another exciting example of the NFC technology is that users can unlock their car doors using any NFC-enabled mobile device. The technology made its debut with the 2021 BMW 5 series. Once this technology is set up and enabled, you simply need to tap your car door handle to unlock without having to use a key. Additionally, the same principle is applied to unlocking the doors at home using an NFC-enabled key or smartphone.

Connecting Mobile Devices and Accessories Instantly

We now frequently connect our accessories to our smartphones but sometimes connecting devices can be annoying. With NFC, as long as both devices support NFC, you can establish a connection seamlessly within seconds with a single tap.

Using Smart NFC Tags to Automate Actions

These smart tags come in handy for various reasons as they can provide different kinds of information to your device. Usually, the NFC tags contain web address links. However, they can be set to execute other actions with your device, such as turning down the ringer, turning on the Wi-Fi, etc. Interestingly, the tags can be embedded into almost anything.

Is NFC Payment Safe? Pros and Cons Explained

We’ve talked about the different benefits and advantages of using NFC. However, one question comes to mind, is it safe? Like any other thing, NFC comes with certain drawbacks that you might want to keep in mind. Although this method is considered secure, it is theoretically vulnerable to proximity-based threats like relay or eavesdropping attacks. However, because of the close proximity needed, this treat is not a big deal. At least before anyone could steal your data, they have to be very close to your device. Aside from that, below are some of the cons of the NFC technology.

• It’s not supported by all smartphones.
• Certain use cases, such as NFC-based public transport or secure identity verification, are still rolling out or vary by region.

Why NFC Payment Technology Is Changing How We Pay

NFC payments have become quite popular, and many people are beginning to take advantage of the exciting and stress-free technology. With NFC, in-person purchase has become very easy, and it has helped reduce debit/credit card losses and fraud. We expect to see more businesses and customers around the world adopt this incredible payment system with time. NFC is undoubtedly going to be a big part of day-to-day commercial activities worldwide because it is straightforward to use and hassle-free.