Developed in the early 2000s, near field communication technology allows for two devices to exchange information when in close proximity. Previously, NFC technology was primarily used for access identification cards but is now increasingly being used as a contactless payment method.
What is NFC Payment and How Does it Work?
Near field communication, commonly abbreviated as NFC, is a type of technology used to exchange data between two devices that are close together. NFC payments are a contactless payment method that includes tap pay credit and debit cards in addition to mobile wallets stored within smart devices.
NCF payments are achieved when the payment method and reader device are activated close to each other. A contactless connection is formed between the two devices through radio waves that contain encrypted customer data and facilitate the payment process.
The most popular NFC payment solutions include-
- Apple Pay
- Google Pay
- Android Pay
- Samsung Pay
In order for a business to accept NFC payments they need to invest in a specialized card reader. Card readers are offered by various vendors, including PayPal and Square, and are generally affordable enough for small businesses and start ups to invest in.
7 NFC Payment Facts
Near field communication technology offers prominent benefits for both businesses and consumers. Unsurprisingly, merchants and customers alike are eager to learn more about NFC payments.
7 significant things to know about NFC payment include-
A common misconception about near field communication payments is that the payment process will take too long to complete. In actuality, contactless payments process more swiftly than chip card transactions.
The reason that NFC payments are faster than chip card payments is that they skip the swiping, signing, and entering PIN number steps necessary when using a debit card or credit card.
Business owners and employees alike know that customer satisfaction rates are negatively impacted when wait times are too long. Accepting NFC payments is a great method for businesses to decrease wait times and as a result optimize the customer experience.
2. Customer Engagement
Faster and more seamless payment solutions benefit both businesses and customers by improving customer engagement levels. Mobile payments are helpful for creating and sustaining a trusting relationship between customers and businesses.
Each NFC payment supplies merchants with useful analytics to better understand customer demands, patterns, and needs, allowing businesses to increasingly personalize customer experiences. As a result, NFC technology makes it easy to customize coupons and advertisements for specific customers.
Contactless payments allow customers to leave their wallets at home and complete transactions using only their mobile devices. Mobile wallets can store multiple credit cards and debit cards effortlessly, an easy alternative to customers having to carry around a large number of cards in a physical wallet.
While customers highly value convenience, they also want customized buying experiences each time they shop. NFC payments work as a great solution to provide both a convenient and personalized customer experience.
Digital wallets are not as susceptible to theft as traditional wallets. If a customer's phone is stolen, passcodes and biometric protections will prohibit thieves from accessing sensitive data.
A mobile wallet is also a safer payment method than a magnetic strip card. While sensitive customer data is exposed each time a debit or credit card is swiped, mobile wallets keep customer information securely encrypted.
Each tap pay transaction avoids revealing real card information through encryption techniques. As soon as the payment terminal receives virtual customer data provided by the mobile wallet, the data is even further encrypted using Payment Card Industry (PCI) validated methods.
Businesses that are familiar with the honor all cards policy may be wondering how NCF technology would be handled. The honor all cards policy advises businesses that accept any major branded credit card to accept all other credit card brands.
A concern for NFC technology vendors is that their competitors will steal their customer base by using the customer data supplied through each transaction. For example, in the situation where a future Walmart Pay app needed to be accepted by Target, or vice versa.
There has not yet been any honor all wallets statements released by any of the major NFC technology providers to date.
Many small business owners assume that NFC technology equipment is out of their budget. Costs for NFC readers can be as low as $49, with a shocking 88% of POS systems shipped by the end of 2017 already having NFC capacity built in.
The pricing of NFC devices and their POS system compatibility make this technology incredibly accessible for small businesses and start ups to implement. Additionally, credit card processors charge the same processing fees for mobile payments as they do for physical credit cards.
Not so long ago, people were hesitant to integrate credit card and debit card payment methods into their business practices. Now, card payments are a widely accepted component of commerce norms.
During a 2017 study of United States consumers, more than 50% report using NFC payments methods in store. As near field communication technology becomes more commonplace, mobile wallets and contactless payments are on track to become just as normalized as card payments.