NFC Mobile Payments: A Short Guide to Everything You Need to Know About Them
Have you heard of NFC mobile payments? You probably have because they are the most common and fastest method of contactless payments. But what exactly are they? How do they work? And… what is NFC anyway?
We’ve prepared this short guide on NFC mobile payments to explain everything you need to know about them and more. So, what are you waiting for? Let’s get reading!
What Is NFC?
NFC stands for Near Field Communication, a type of contactless communication between two devices. It allows users to send data from one device to another at high speed. This includes making payments with their mobile phone by tapping or waving their devices without touching the receiving device.
This technology has become very popular in the payments industry in the past few years with many businesses using it to accept mobile payments. It allows effortless, fast, and secure payments from smartphones. Learn more about Mobile Wallets.
What makes NFC so great is that it allows data transmission, both, when the devices are active and passive. Active devices use a power source to work and have NFC enabled. They can communicate with other devices, process data, and send and receive NFC data. Some examples are smartphones and train station card readers.
Passive devices, on the other hand, don’t need a power source to work. Instead, they get activated by the electromagnetic field from the active device they pair with. While in passive mode, they can send and receive data but can’t process data on their own nor connect to other passive devices. Some examples are NFC readers, terminals, and advertisement tags.
How Does It Work?
The NFC technology uses radio waves to connect and communicate with another device. It works at a frequency of 13.56MHz and uses a set of protocols for wireless communication.
To connect two NFC devices and start data transmission, you need to have both devices close to each other at around 1 or 2 inches. When the devices “pair”, the data is encrypted to maximum security and sent to the receiving device via electromagnetic fields. The receiver might need to send back the encrypted data and repeat the send-receive process until the data transmission (transaction) is complete.
All this takes only a few seconds, which is why many businesses use NFC for accepting payments. Customers, on the other hand, love NFC because it allows them to buy whatever they need without waiting in lines for paying in cash and waiting for a change.
Modes of Operation
NFC supports three modes of operation:
- Peer-to-peer – a two-way data transfer between two devices. For example, making payments with your smartphone.
- Read-write – one-way data transfer between two devices. In this mode, one of the devices is the sender and the other the receiver.
- Card emulation – when an active NFC device is used as a smart card inserted in an NFC terminal.
NFC Mobile Payments: What Are They?
NFC mobile payments are contactless payments that use NFC communication to process payments. They are used for making payments with smartphones and smartwatches using mobile wallets and tap to pay credit and debit cards.
Using this type of contactless payment method is very similar to the classic payment with a credit card with a magnetic stripe. Bur, instead of reading the magnetic stripe to initiate the transaction, the radio signal does it.
How Do They Work?
NFC mobile payments are probably the most convenient payment method in the world. Paying with your phone is super-fast, secure, and effortless. In order to make payment with your smartphone, you have to put it close to the NFC received (e.g. a terminal, a card reader). As already mentioned, the NFC devices use radio signals to communicate.
When the two devices are close, the NFC chips encrypt that data and send it to the receiver. The encryption is on the two ends to make the payments as secure as possible. Moreover, in order to make the transaction, the customer has to authorize it with a passcode, fingerprint, or face ID.
Once the transaction is authorized, the money is transferred to the merchant’s terminal with a randomly generated single-use code which is sent to the merchant. In this way, each transaction is highly secured and protected from hackers.
NFC Mobile Payments and Security
One of the greatest concerns of NFC mobile payments is their safety. Both merchants and customers are worried that their data may be exposed to hackers. And, while this is a question of concern, there is nothing to worry about because NFC mobile payments are highly secure.
What Makes NFC Mobile Payments Secure?
NFC mobile payments employ various types of security measures to ensure all data remain safe. Those are:
- Encryption – all data is encrypted during transactions to prevent data leaking.
- Dynamics – the NFC data is dynamic, which means it changes all the time so that hackers can’t decode it.
- Tokenization – the data is encrypted into something totally unintelligible during transactions, such as a random number.
- Fingerprints – transactions are authorized with a fingerprint, and as you may know each fingerprint is unique so there’s no way for another person to duplicate yours. Hence, no one other than you can authorize the transaction.
- Facial recognition – similar to fingerprints, some mobile wallets require facial recognition through face ID to ensure that you are authorizing the transaction.
Benefits of NFC Payments
If you ever thought about why NFC payments are so popular, it’s because of their incredible benefits. They outrun both Bluetooth and EMV because they are faster, more convenient, and more secure. But, let’s see its benefits from a closer point of view.
NFC payments are fast since they don’t require communication and verification between the sending and receiving devices as it happens with EMV transactions. It takes a few seconds to transfer money from your smartphone to the receiver after tapping on your phone. This allows for much faster transactions compared to those made via EMV. And, speed is everything if you work with lots of people and don’t want to see lines in front of the counter. Plus, faster payments mean more sales!
As already mentioned, NFC payments use various types of security measures to ensure safe payments. Mobile wallets encrypt the data before transferring it to the receiving device. Some use classic encryption while others, like Apple Pay, tokenize your bank details, which turns the data into something unusable. Plus, the tokens change with every transaction, which makes them impossible to extract.
In addition, some mobile wallets require a fingerprint or face ID authorization before making a payment.
Paying with mobile wallets is incredibly convenient. You just need to bring your phone close to an NFC reader (e.g. a terminal) and tap on your phone to pay. Also, NFC payments consume less power, which means you can use this technology even in passive devices, like tags, without powering them up.
Deeper Customer Engagement
Accepting NFC mobile payments creates a stronger and deeper relationship between merchants and customers. This is because they both get what they want: convenient, fast, and secure transactions.
On one side, customers trust the merchants more and return again and again and again. On the other side, merchants are able to integrate customer loyalty programs into payment processing more effectively. For instance, customers can redeem a coupon right after tapping on their phones. Moreover, these programs help merchants collect useful data about their clients, which helps them determine the success of their program and improve the same if needed.
And, last but not least, by accepting NFC mobile payments, your sales will increase. This is a result of more secure, more convenient, and much faster payments that don’t create lines of customers waiting to pay.
How to Accept NFC Mobile Payments?
Accepting NFC mobile payments in your business will help you take your business to another level. It will help improve your customer service, increase sales, and speed up the operation.
If you want to implement NFC mobile payments in your business, you need to follow these steps:
Choose an NFC Payment Processor
There are A LOT of payment processors on the market, but not all of them support near-field communication technology. So, make sure the one you choose offers NFC mobile payments.
Set Up a Merchant Account
Once you choose your payment processor, sign up for a merchant account to get access to your finances and be able to accept NFC mobile payments.
Install an NFC-Enabled Reader
In order to accept NFC mobile payments, you need to have the right equipment. This includes contactless payment terminals with monitors, chip readers, and card swipers. But, since there are various types of terminals, first, you need to choose the right type for your business. For this, you need to take into account the size of your business, your customers, and your business needs.
Install the Reader and Associated Software
Once you choose the right NFC-enabled reader for your business, you will have to install it along with its software.
Connect to the Internet
Upon installing the equipment, you need to connect to the internet so that it works.
And, you are ready to accept NFC mobile payments!
What Happens After Processing Payments?
After you process NFC mobile payments, the funds transferred go directly to your merchant account. It is the same as when you use credit card transactions.
What Else You Should Know About NFC Mobile Payments?
Ok, so we’ve covered the most important things you should know about NFC mobile payments. But, there are other things you should also know in order to understand near-field technology and be able to offer full support to your customers.
So, let’s take a look at what else you should know about NFC mobile payments.
How Does Paying with NFC Work?
As a business owner, apart from knowing how to accept NFC mobile payments, you should also know how to make a payment. You need to know what customers should do in order to pay with phone. This will help you better understand the entire process of sending and receiving funds using near-field communication technology. Also, it will help you troubleshoot any issues your clients might have when they make payment in your store.
So, to be able to use NFC mobile payments, users, first, need to have a mobile wallet app installed on their phones. Which app they install depends on their phone’s brand. Upon installing the app and setting up their wallet, users can start making payments.
Now, here are a few things every user should know:
- Android users – To use NFC payments, your device must run version 4.4 or later. You can enable this type of payment in the “Settings” > “NFC and Payments” section.
- Apple users – To use NFC payments, you must use iPhone 6 or later or later-generation iPads, including iPad Air, iPad Pro, and third-generation iPad Mini.
If you have the right device, you can search the store for the wallet app, which you need to install on your phone. Android users use Google Pay, iOS users use Apple Pay, and Samsung users use Samsung Pay. Of course, you can also use other mobile wallets available on the web as long as they are comparable with your phone.
Once you install the wallet app, you’re ready to use the much-beloved tap to pay method.
The Whole World Goes Mobile – Keep Up with the Change
If you want to succeed, you must follow the latest trends regardless of your industry. When it comes to payments, NFC mobile payments are the rage. Therefore, you need to adapt your business to this trend and start accepting them. It is the only way to be competitive in the market.
The whole world goes mobile, so why would payments stay the same?
People across the globe have shown they enjoy mobile payments because they are comfortable. By using the NFC technology, you will offer that comfort to your clients as well as the best service. Plus, you will give them exactly what they want: multiple payment options.
Concerns about NFC Mobile Payments
While NFC payments are quite popular across the globe, there are still some concerns about them.
Consumers are most concerned about the security of NFC mobile payments. As we’ve mentioned previously, NFC mobile payments are secure and use various safety methods, such as encryption and tokenization. However, they still fear that hackers can get around these safety features and attack their accounts.
Apart from security, consumers also hesitate to use mobile payment because they don’t know how to access mobile wallets, where they are accepted, or they don’t know anything about them.
Merchants are also concerned about using NFC payments. The number one reason for this is the cost of implementing and accepting mobile payments. The second reason is their security. And, the third reason is the higher chance of fraud.
NFC Mobile Payments Are Here to Stay
Regardless of the concerns consumers and merchants have, NFC mobile payments are here to stay. The biggest reason for that is the Covid-19 pandemics, which lead to a 40% increase in contactless payments. And, as it seems, they will continue to use contactless and NFC payments even after the pandemic is over.
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