Near Field Communication, or NFC for short, has swept across the payments industry over the last few years. There is no arguing that contactless communication, such as MasterCard’s PayPass is on the rise. In fact, in 2016 consumers will spend a total of $620 billion USD on all forms of mobile transactions globally. This is a 37.8% year-on-year growth from 2015.
However, many people still don’t understand the technology that powers NFC. So let’s break it down.
What is NFC and how did it come to be?
NFC is a contactless communication between devices.
NFC deviated from Radio-Frequency Identification (RFID). RFID is a long-wave (can range between 1-12 meters) and is one-way communication. RFID is commonly used on race-bibs for timing runners or library book check-in/check-out systems.
In comparison, NFC is short-waved (around 4 inches) and can communicate two-way. NFC chips can be placed in mobile phones, computers, and debit and credit cards. They are not exclusive to payments and can be used to unlock your car, in advertising campaigns, and even be placed on business cards.
How does NFC work?
- You want to purchase an in-person product and go to the register.
- You notice their payment terminal accepts NFC, so you pull out your NFC enabled card or your mobile device.
- The cashier rings up your purchase and pushes the value to the payment terminal.
- The payment terminal emits a small electric current, creating a magnetic field that ‘connects’ the payment terminal to your card or phone.
- The field is picked up by the NFC chip in your card or phone.You may be asked for verification on your mobile device through a fingerprint.
- Your mobile phone then sends electrical impulses, which it sends back to the payment terminal. These electrical impulses carry a token of your banking information.
- The payment terminal processes the transaction, hopefully with approval.
Is NFC safe?
NFC payments are sent through a secure link, and the payment information is encrypted before sending. Only authorized devices (the payment terminal) will be able to decipher the information. Also, the short-range helps to combat those looking to ‘eavesdrop’ on the transaction. NFC payments are just as safe as EMV chip cards, and both are leaps above magnetic swipe cards.
Card brands and banks may also impose a payment limit, usually found to be around $100 on NFC payments. AMEX however, does not impose a limit as they find the fingerprint identification to be sufficient security.
NFC is growing, with all signs pointing towards it taking over in-person payments in the next decade. Are you tapping?