What is NFC payment and why should businesses invest in it?
What is NFC payment and why should businesses invest in it?
The benefits of NFC (or Near Field Communication) acceptance overlap for both businesses and customers - this, combined with the current expanding need for contactless payments, puts the payment option on track to become one of the most popular in the field.
We’re here to help merchants and consumers understand what NFC payment acceptance is, how it works, the benefits and security features it brings to the table and why businesses should consider investing.
What is NFC payment and how does it work?
NFC is a type of contactless communication technology that allows data transfer between two devices placed within four inches of each other. One of the most common uses of NFC is at physical payment terminals, where the customer hovers their credit card over or near a designated surface.
NFC is similar to radio-frequency identification (RFID) and is based on a radio frequency field using a base frequency of 13,56 MHz. It’s also similar to Bluetooth®, however, NFC needs less power, works in shorter distances and doesn’t require “device discovery” or manual synchronization.
As mentioned previously, a frequent use case of NFC technology is between credit cards and terminals but with the advancement of mobile payments, smartphones often substitute credit cards. In fact, specific forms of contactless payments are powered by NFC, like eWallets such as Apple™, Google™ and Samsung™ Pay. In all cases, the terminal or card reader receives the payment data wirelessly, thus completing the payment transaction. Whichever method consumers choose to use, it’s getting clear that the time of dipping or swiping your good old plastic card is fading into the past.
A recent study surveying 2000 consumers in the U.S., China, Japan, South Korea, UK, Spain, France, Germany and Italy showed that 44% of people use contactless technologies daily, and over 75% of respondents use their contactless payment card or mobile payment wallet multiple times per week or more. Usage frequency, experience, confidence and familiarity with NFC technology are all highly positive, according to the study.
This means consumers feel comfortable and confident using NFC technology to pay for goods and services, hovering or tapping away at card readers, which creates a call to merchants to start familiarizing themselves with the technology and utilizing it at checkout.
The Top 3 Benefits of NFC payment
1. NFC payment is fast and easy
Unlike the traditional method of inserting or “dipping” or swiping a card at checkout, NFC payment is much more convenient because it reduces the time it takes to complete a transaction. For consumers and merchants alike, the gentle hovering or tapping of a card can take less time than even waiting for the payment to go through — and in most cases, even the PIN code can be skipped.
With the increasing popularity of eWallets (even among boomers, with 64% using mobile payments now) consumers appreciate that they can leave their wallets behind, and now thanks to NFC, can even use their smartphone or smartwatch when shopping. With so much of our lives packed in smart devices, consumers grow accustomed to such solutions – and if a merchant can cater to that need, it certainly adds to the overall shopping experience, helps to cut down time and process more sales.
2. NFC payment is secure
NFC technology uses data encryption to provide maximum security. This means that when the cardholder information appears in the payment process, it is encrypted, so the full credit card data cannot be accessed or unlocked.
Merchants are also advised to use a payment processing partner that provides safe and secure payment acceptance technology and upholds the PCI (Payment Card Industry) compliance standards.
While NFC payment is a safer choice than a magnetic-stripe card (magnetic-stripe cards have static data handling, with all data available on the back of the card via the magnetic strip), there’s another dependable factor when it comes to NFC and mobile wallets - and that’s the extra layer of security by your phone, from a simple password to biometric identification. So even if the device was stolen, the consumer’s credit card data in the background would still be safe.
3. NFC payment can boost customer loyalty
NFC-enabled mobile wallets can also substitute for physical loyalty cards, and this is becoming easier by the day for customers to enroll and take part in. Merchants have great options to integrate this into their payment processing as well. As 76% of consumers say they wish to redeem their loyalty deals tied to their cards at the point of sale (POS), this just might be one of the single best strategies for businesses to strengthen customer engagement.
Besides making it easier for the customer to join a loyalty program, mobile wallets, thanks to the power of NFC, enable merchants to access personalized offers with only a tap or a hover — naturally, this means more average spending and even more, valuable analytics. Accessing consumer-specific information such as buying preferences will help businesses refine their loyalty offerings.
The options are numerous: they can think about discounts, coupons or free gifts and any other incentive that will bring back the customer to spend more — and if they can do that with ease (looking at NFC technology again), merchants can know they really have provided a full experience and possibly, a life-long loyalty to their business.
Is NFC safe?
NFC provides one of the safest payment technologies. It NFC is comprised of three main layers of security:
1. Proximity protection: Because of NFC’s close proximity range, a thief would have to be extremely (and obviously) close to the person holding the NFC-enabled device and to the payment terminal, which would be highly conspicuous behavior from a stranger.
2. User initiation: There is at least one round of identification built into the payment process when a consumer uses NFC-enabled forms of payment. First, in each case, they have to start the process: for smart devices, this usually means launching a specific application and a few seconds later authenticating themselves, for example, with fingerprint scanning. For NFC-enabled credit cards, putting in a PIN code comes into the picture as well.
3. Secure element validation: A transaction will only go through if the card or device validates the purchase through a secure element chip.At this point, it’s not the credit card data that is processed, but a unique digital signature that is assigned to every transaction to offer a higher level of security.
Similar to all other payment forms, NFC technology cannot be 100% safe. Hackers can find access to the NFC terminal and collect sensitive merchant and customer data or can do the same with users’ smart devices by deploying malware code. But again, for the latter, hackers would usually need to be “near” their target, and further measures of protection, such as tokenization, fraud filters or EMV® are all there to ensure that transactions are secure.
How do businesses use NFC?
Setup is fairly easy, but if a merchant has a reliable payment processing partner, that partner will ensure everything is configured so businesses have the whole system ready, safely and in time to start accepting NFC payments — both in the form of EMV chip cards (EMV, meaning Europay, Mastercard and Visa, which created the technical standard for such payment methods) and eWallets.
While merchants are thinking about adding NFC capabilities to their checkout process, it’s best to look for smarter solutions that equip them with other functionalities completing this technology — a good POS system will also allow them to manage transactions and related business operations in a seamlessly integrated way.
Why should businesses invest in NFC payment?
NFC payment is quickly becoming an unmissable asset among merchants’ business tools, considering its convenient benefits and rising popularity among customers as well.
If merchants decide they want to add NFC functionality to their payment acceptance suite, there’s only one task left: to find a payment processing partner that will not only endow them with the technology they need, but also offer a variety of virtual and physical options that will suit their own processes.
CardConnect provides a number of payment devices and solutions that make NFC acceptance a breeze, while also meeting merchants’ unique processing needs.