What Is NFC: Meaning and Role in Payments

Integrated in many digital devices, Near-Field Communication (NFC) is a technology that is becoming increasingly popular. It has become a standard in communications. However, this convenient acquisition remains a mystery to many people and its full potential is yet to be explored. 

So, what is NFC, and how does this technology work? What are NFC payments and how secure are they? These questions can be answered by a few and if you are not one of them, don’t worry – we’ll clear things up for you!

What is NFC and how does it work?

NFC, or Near-Field Communication, is a technology that provides easy contactless sharing of information between different electronic devices that support it through a digitalised tag. 

Typically, it is used to make payments and identify or exchange data. Most often, one of the devices involved in the data exchange is a smartphone.

This type of technology means “communication in close proximity”. In other words, it is a technology that allows different digital devices or to exchange information when placed side by side.

Derived from the Radio Frequency Identification (RFID) technology which is usually equipped in magnetic access cards, NFC has almost infinite potential. It allows smartphones, tablets, and even laptops to share data, photos, music, and more with ease. 

But this wireless technology goes even further. It limits data exchange within a perimeter of about four centimetres. Therefore, we consider NFC a much more reliable payment alternative than credit or debit cards. This is one of the primary advantages of Near FIeld Communication in terms of security, making it especially common when processing contactless payments.

It’s good to mention that EMV and NFC payments are two separate things. That being said, EMV chips can be used for NFC payments as well. EMV, which represents Europay, Mastercard, Visa, is a security standard and instalment tech that is associated with the chip in your credit/ debit cards.

What is an NFC tag

Also called smart or information tags, NFC tags have a certain amount of memory, paired with a radio chip and a receiving wire. 

Near-Field Communication tags don’t have a power source because they collect energy from the reader device. For example, when you hold the tag next to a card reader, the chip is being powered while both devices transfer information. 

You can use the NFC tag when you need a fast transfer of digital data and the most common places to find such tags are smart devices. Near Field Communication tags allow smartphones to make payments via a single tap or a hover. 

Regarding expected uses for it, there are currently no limits established.

NFC in payments

At first glance, it may seem that NFC is an unnecessary extra for most modern mobile phones, but it is indispensable with data exchanges and especially contactless mobile payments. When paying with a mobile phone, Near-Field Communication plays an important role.

NFC serves as a mediator for contactless communication between two NFC-enabled devices – laptop, smartphone, mobile phone, or tablet. It is most often used to make contactless payments, similar to payments with credit or debit cards. The enormous advantage of NFC over card payments, however, is the significantly improved security it offers.

In addition, this tech provides other amenities. For example, unlike Bluetooth, it does not require any manual settings or waiting time for mobile devices to be detected and paired before they can exchange information. With Near-Field Communication, the two devices connect quickly, processing any data exchange automatically when they are 4 cm or less from each other. 

When all conditions are met, the devices transfer information and prompt the user to perform some action – such as a contactless payment on card machines.

Unfortunately, things can get a little complicated here because not all credit card machines are equipped with NFC technology. Being a tech developed in recent years, it is only available in newer models of payment terminals – for example, those offered by myPOS. Therefore, before you try to make a contactless payment, make sure that both devices you use support Near-Field Communication.

Did you know that you can use your smartphone as a card reader instead? All it requires is, and you’ve probably guessed it, that your device has an integrated NFC chip. Using a soft POS app like myPOS Glass, all that you need to do is enter the amount and hover a credit or a debit card that supports contactless payments.

Is NFC secure

Now that we’ve covered the basics of NFC, it’s time to answer one popular question – are NFC mobile payments secure?

In short, yes, NFC is considered reliable and secure, offering more peace of mind when compared to other alternatives, like using physical cards for payments.

Part of the explanation stems from the fact that in order for NFC to work, the devices must be in close range (usually a few centimetres from one another). This automatically minimises the risks of interception. 

In addition, in most cases, there are additional security layers incorporated into the process. For instance, NFC payments are usually protected through encryption and tokenisation. As a result, data remains unreadable to others and sensitive details are fully protected and secured. 

The difference between NFC and EMV

Although both NFC and EMV are terms that relate to wireless communication, these two technologies differ dramatically.

As explained above, NFC enables mobile payments and is mostly used for short-range communication between devices. In the case of NFC, a mobile device with an NFC feature can communicate with an NFC reader enabling quick and secure transactions. 

NFC works by permitting the exchange of data between closely positioned devices, supporting a lot more than mobile payments. The technology can be used for exchanging data between NFC devices, pairing Bluetooth devices, and data transfer via NFC Data Exchange Format (NDEF). 

For instance, an active NFC device, like a smartphone, can establish communication with a passive NFC tag exchange data. 

At the same time, EMV (Europay, Mastercard, Visa) represents a security standard for the chips found in credit cards, enabling international secure payments between computer chips and terminals. 

Once used to complete a transaction, EMV cards are either tapped on or inserted into an EMV-compliant card reader. As a result, the chip creates a unique payment code, preventing risks of fraud. 

Top reasons to accept NFC

Given the vast range of benefits NFC offers, it’s no surprise that it has gained such popularity around the world. 

Here are some of the top reasons to support NFC. 

Advanced security

As noted above, NFC payments stand out with extra security layers when compared to other transaction options. 

When a mobile device with NFC support is utilised to initiate a payment, the data exchanged is fully encrypted, while tokenisation makes sure that the payer’s card details remain safe and are never exposed. 

As security is one of the biggest challenges in the payments industry, this powerful property makes NFC technology much preferred.

Faster processing

When it comes to payments, processing speed also plays an important role. 

Another key advantage of NFC technology is that it enables quick and seamless transactions, significantly cutting the time that the customer needs to spend at checkout. 

This efficiency can be especially helpful and valuable in high-traffic business environments, where a quicker payment process can boost customer satisfaction and help increase sales. 

The best example of this is that NFC-enabled mobile devices can simply make payments by being tapped against an NFC reader in a matter of seconds. 

More convenience

Last but not least, NFC technology makes payments a whole lot easier and more convenient. 

Relying on nothing but a mobile device to make payments, shoppers can experience unmatched comfort and convenience. Not to mention that NFC-enabled mobile devices can simultaneously tackle a range of activities, like making payments, sharing contact details, pairing with Bluetooth devices, and more.

This makes NFC an attractive solution for those who appreciate speed and simplicity.

Making contactless payments with NFC

Besides the payment processing device, contactless payments with NFC require you to have the following two things:

• A mobile wallet;
• A phone equipped with a Near-Field Communication chip.

Let’s look at each of these two prerequisites separately.

Mobile wallet

A mobile wallet is a virtual wallet that is very similar to a credit card. Usually offered as a banking service, the user loads a predetermined amount of money into the wallet and manages it via a mobile phone.

The great convenience of virtual wallets is that the user can store a certain number of credit or debit cards and top it up as soon as needed. In other words, such technology provides a simple way to make payments when shopping in some stores.

Mobile wallets require you to install an application on smartphones or smartwatches running on Android, iOS, or Windows Phone. You can download the often free application from the online store of the creator of the respective mobile OS. All that you have to do is create a profile and load your mobile wallet to make payments through it.

This is where the magic of Near Field Communication comes in. Thanks to this technology, you can only make a payment by bringing your smartphone closer to the merchant’s card reader without having to look for cash or for your credit or debit card. 

Some of the most popular mobile wallets at the moment are Apple Pay, Samsung Pay, Android Pay, or Google Pay. Each of these is compatible with all credit and debit cards, but Apple Pay can only work with certain models of mobile phones.

Also, before settling on a particular type of mobile wallet, consider whether it offers you the functionality you need and what cards you will use it for – credit, debit, loyalty cards, or even gift cards. It is extremely easy to operate with and some additional features included are electronic gift cards, immediate receipt of sent funds, and no monthly service fees.

Phone equipped with NFC

Of course, you can’t make a contactless payment if you don’t carry your contactless card, a smartphone, or a smartwatch. Keep in mind, however, that unfortunately not all smartphones have built-in NFC chips, so before you start such a transaction, first check that your smart device has one.

Not sure if your device supports Near-Field Communication? Simply check your phone’s settings. If this feature is available, you could activate it in the same options.

The potential of NFC chips

The future of NFC looks promising – this technology is enjoying widespread acceptance in more and more digital devices. Those chips are cheap and easy to produce and embed in a tag. All of this further contributes to the high demand for Near-Field Communication.

We also use Near-Field Communication for purposes other than payments and file sharing. These include distributing information materials during conferences, weather forecasts, social media notifications and even finding cafes, restaurants, gas stations, and local pharmacies.

The small size of NFC chips allows them to be attached in numerous places and on many products. In addition, they can be programmed to perform a number of tasks. That is why this technology will certainly become an indispensable part of our daily lives.

Conclusion

Now that you know what NFC is, you can hop on the trend and enjoy ever-increasing convenience and security. It is only a matter of time before you find the ease with which you can make payments via smart devices, especially since all the prerequisites are already in place. 

And if you’re a merchant, rest assured that all myPOS card machines have a Near-Field Communication chip integrated within them.

Disclaimer: Please be aware that the contents of this article and the myPOS Blog, in general, should not be interpreted as legal, monetary, tax, or any other kind of professional advice. You should always seek to consult with a professional before taking action, since the particulars of your situation may materially differ from other cases.