Invented in 2004 by Sony, Phillips, and Nokia, near field communication (NFC) is a type of contactless communication between smartphones, tablets, or smartwatches. NFC contactless payments aren’t a new technology; however, their popularity has been growing by leaps and bounds in the last several years, making it seem cutting-edge.
You’ve probably been at a store and seen a consumer pay for their product by tapping or waving their smartphone or smartwatch over a credit card terminal. This is NFC contactless technology at work. The NFC contactless credit card terminal exchanges encrypted data with the NFC technology within a smartphone or smartwatch to complete a transaction without the need for physical contact.
There’s no danger of one consumer paying for another consumer’s product using NFC contactless payments. This is because a consumer’s electronic wallet, which may hold various NFC payment methods such as Apple Pay, Samsung Pay, or Google Wallet, only communicates with the NFC credit card processor when the consumer unlocks the device, selects the payment method, and holds the electronic wallet close to the processor. Additionally, the NFC processor can only connect to one NFC payment method at a time, adding yet another layer of security.
NFC-enabled technology can be used to purchase bus passes, concert tickets, groceries, vending machine snacks, and more. Individuals can also transfer money to their friends with a wave of their smartphones. Additionally, NFC contactless technology allows employees to quickly and easily clock into work, adjust their driver’s seat, open their car doors, access grocery coupons or loyalty points, or pull up the touring schedule of their favorite bands/
With all of these features, let’s see how an NFC contactless reader can benefit your business.
How an NFC-enabled credit card reader works.
NFC is similar to both Bluetooth and Wi-Fi, in that all three allow for wireless communication. However, Bluetooth and Wi-Fi use radio transmissions to communicate where NFC depends upon electromagnetic radio fields. For NFC contactless payments to work, both the payment method and the credit card processor must be equipped with NFC technology.
For example, an NFC-ready smartphone creates a radio frequency that then communicates with an NFC credit card reader. (The devices need to be in close proximity to each other, as NFC doesn’t work over long distances, hence the name: “near field communication.”) When transmitting data, such as credit card numbers, NFC-enabled technology first encrypts the data. Then it establishes a secure channel to transfer it through.
How NFC is different from EMV.
In the payment processing industry, two buzzwords are thrown around more than most these days—NFC and EMV. However, these are very different technologies. NFC contactless payments, as we discussed above, are a way for consumers to pay with their phone or smartwatch, without having to “swipe” or “dip” a credit card. EMV— which stands for Europay, MasterCard, Visa—is a security standard for credit or debit cards that contain computer chips. Chip cards can be inserted into credit card terminals, as opposed to magstriped cards, which need to be swiped. Both NFC and EMV payments are more secure than traditional magnetic striped credit and debit cards.
Many newer credit card terminals allow for both NFC contactless and EMV “chip card” payments. Additionally, for older credit cards that aren’t chipped, you’ll still want to be able process payments via swiping, so look for a payment device that can handle all three types of transactions.
The major credit card issuers (Visa, Mastercard, American Express, and Discover) implemented an October 1, 2015 deadline for all financial institutions and merchants to install EMV-compliant credit card terminals. The idea was that if a merchant didn’t install a chip card reader, then that merchant may be liable for any fraudulent transactions made with a chip card. However, as of now, there is no requirement for credit card processors to be NFC-compliant.
NFC contactless payments are growing in popularity.
Mobile NFC payments are multiplying. Currently, in the United States, only 17 percent of consumers use mobile wallets, but usage is on the upswing. Globally, just under half of millennials use their mobile wallets, with another 32 percent considering this use. Almost 45 percent of Gen X’ers and nearly 30 percent of baby boomers have a mobile wallet. By 2022, it’s predicted that mobile NFC transactions will reach almost 14 billion dollars worldwide.
The benefits of using an NFC reader include:
Convenience.
One of the primary benefits of integrating an NFC reader into your credit card processing system is that it simply makes things easier. Customers can pay with the tap of a phone, creating faster check-out times and more smiles and no fuss.
Frictionless payments for everyone.
In addition to faster check-out times, consumers will consider merchants with the newest technology as progressive and professional. This customer-friendly technology can help attract and retain new consumers.
NFC readers also create better experiences for your business as well. By streamlining payment options, companies can increase their productivity and efficiency by moving customers in and out without hassle. By making payments easy, companies can focus on other core responsibilities which will contribute to their growth and success, such as marketing or employee training.
Building brand loyalty.
By offering quick and secure payment options, businesses create loyal customers. Customers will be happy with the ease of the checkout process and continue coming back, increasing retention. Also, satisfied customers tell other consumers about their experiences, creating growth. For example 42 percent of happy customers will purchase from that merchant again. Additionally, 42 percent of consumers stated that a positive review or recommendation from a friend or family member would impact their buying decision more than a store sale.
Now, let’s compare happy customers to unhappy customers, who say there is a 91 percent chance that they won’t purchase from a merchant again after a bad experience. Further, unhappy customers tell nine to fifteen people about their unsatisfactory experience.
Better security.
NFC mobile wallets are more secure than traditional magstriped credit and debit cards. If a consumer’s phone is stolen, then the consumer’s credit card information in the electronic wallet is password protected. Additionally, merchants (and their employees) don’t have physical contact with the consumer’s method of payment, reducing potential risk and theft.
When shopping for an NFC contactless reader, consider the following:
- Do you simply need to upgrade your current system to accept NFC payments?
- Can you accept NFC, EMV, and magnetic strip payments, providing the ultimate in flexibility to your customers?
- Are the mobile processing fees the same as accepting any credit card, or do they differ?
- What is the cost?
With the continued growth of electronic wallets and mobile payments, the benefits of implementing an NFC contactless credit card reader simply cannot be ignored. At North, we offer a full lineup of NFC-ready solutions from Bluetooth card readers to smart terminals and points of sales. We help make it easy to provide your customers with the frictionless transactions they’ve come to expect. Whether you’re looking for a wireless credit card terminal or an NFC mobile card reader, we have the technology you need to accept payments wherever your business takes you. We’ll even help you customize a payment acceptance plan to your specific business. To set up a consultation, contact us here or give us a call at 877.840.1952.
