NFC Mobile Payments: What They Are and How Businesses Can Use Them

Today, nearly 90% of Americans use some type of contactless payment. In some markets, this figure is even higher. Singapore residents have adopted contactless payments at a rate of 97%. In the United Kingdom, the adoption rate sits at 93.4%. 

Near-field communication (NFC) payments are a subset of contactless payments. As NFC technology becomes more ubiquitous in payment terminals and mobile devices between now and 2028, the volume of NFC transactions is forecasted to grow by 150%. 

As a merchant, NFC mobile payments are a secure, fast way to process transactions. Many consumers now expect companies to accept NFC payments, so it’s an important factor in enhancing customer satisfaction and retention rates. 

What are NFC mobile payments? And how can you incorporate NFC tap-to-pay technology in your business? For best practices, benefits, and more, read on.

TL;DR

• With NFC technology, near-field communication technology is used to process payments.
• NFC payment security involves multi-factor authentication, range limits, encryption, and other tools that protect customer data.
• This style of payment is popular because of how fast, secure, and convenient it is.
• While customers love NFC mobile wallets and tap-to-pay options, the added security and speed are also useful for companies as well.
• By switching to the right equipment and training your staff, you can process NFC and traditional payments.
• NFC payments can reduce checkout friction, speed up transactions, and lower labor costs. They can also be used to support your company’s existing customer loyalty programs.

With the help of a merchant services provider like PayCompass, you can get help setting up NFC technology, conducting a rate analysis, and determining the best way to implement this payment option at your business.

What Are NFC Mobile Payments? 

So, what are NFC mobile payments? More importantly, how can you incorporate them at your company?

NFC payments are used with mobile wallets or NFC-enabled debit and credit cards. Instead of using magnetic swipes or chips, these payments are processed using NFC technology. 

Basically, the payment terminal and NFC device send and receive encrypted information. A tokenized, one-time-use number is created as an added security measure.

To accept NFC payments, your company needs a payment terminal that uses NFC technology. Once this is set up, you can accept popular NFC options, such as Apple Pay, Samsung Pay, and Google Pay.

How NFC Mobile Payments Work

With NFC mobile payments, your customers don’t have to swipe a magnetic strip or insert a chip card to process the transaction. Instead, this payment processing style uses near-field communication to relay messages between your payment terminal and the customer’s card. For a deeper dive into this process, let’s look at a step-by-step guide to how NFC payments work.

1. The customer’s phone, smartwatch, or other device is equipped with an NFC chip.
2. At the merchant’s shop, the customer is rung up by a clerk like normal. The clerk enters the purchase amount into the point-of-sale (POS) system.
3. Then, the payment terminal sends out a low-frequency signal to any nearby devices. This wakes up the customer’s NFC-enabled device so that it can submit the payment.
4. As long as the device or watch is close enough to the payment terminal, it can exchange information using NFC technology. The device generally will need to be less than an inch away from the terminal in order to complete the transaction.
5. Next, the customer’s device creates an encrypted token and relays the necessary data to the payment terminal. The token is a one-time-use number that is used in place of a credit card number, preventing potential theft.
6. The payment network verifies that the token is genuine. It checks to make sure funds are available before approving the transaction.
7. Once the transaction is approved by the payment network, the customer may still need to use their fingerprint, a passcode, or another measure to approve the transaction.

The Top Benefits of Using NFC Mobile Payments

From NFC payment security to faster transactions, there are a number of advantages to adopting NFC mobile payments at your company. This type of contactless payment can be used alongside your traditional payment options to provide your customers with a broader range of options. The following are some of the most important benefits.

Speed

One of the first reasons to adopt NFC payments is the speed. With traditional transactions, the customer has to swipe their card or place it inside the payment terminal. 

In comparison, NFC payments don’t have to be physically swiped or entered into the terminal at all. Because of this, NFC transactions can typically be processed in under a second. Whether you want to reduce your company’s labor hours or avoid bottlenecks at the checkout counter, this added speed offers a number of benefits.

Security

When it comes to data protection, NFC payment security stands out from the crowd. With a traditional credit card or debit card, criminals can steal the card number and expiration date. At many retailers, this is all the information they need to run fraudulent transactions.

NFC mobile wallets don’t have the same security risk. A one-time-use card number is created with each transaction, so criminals can’t steal the number and reuse it. 

Because NFC signals only work over short distances, intercepting the information is also incredibly difficult. Even if an interception occurred, the data would be encrypted and unreadable. 

For all of these reasons, NFC payment security is much higher than traditional transactions. Whether you want to avoid chargebacks, protect your customers’ financial information, or maintain customer trust, NFC payments can help.

Convenience

NFC payments are one of the most convenient types of credit card processing options. Your customers don’t have to drag along a wallet or purse each time they come to your store to buy something new. As long as they have a phone or a smartwatch, they can easily pay for their goods and services through their device. 

For companies, NFC mobile payments are also an incredibly convenient payment option. They allow your clerks to spend less time processing transactions. Because of the added security, your business can also devote less time and money to ringing up customers and investigating chargebacks.

Loyalty Rewards

While each NFC mobile payments example is different, many mobile wallets allow you to incorporate existing loyalty programs into the customer’s wallet. For instance, Target’s mobile payments are linked to the customer’s Target Red account. If they have coupons, discounts, or gift card funds on their account, they can automatically use these options when they make a payment.

Better Customer Appeal

Customers don’t want slow transactions. By adopting NFC payments, you can appeal to consumers who want fast solutions that don’t require traditional card payments. Whether the customer is out for a jog or simply too busy to grab their wallet, they can still make a purchase.

How Mobile Payments Compare to Traditional Payments

To give you a better idea of how this technology works in practice, we’ve compiled traditional and NFC mobile payment examples. The following table delves into the major factors that separate these payment types, so you can determine if incorporating NFC payments makes sense for your business.

Feature	NFC Payments	Traditional Payments
How Payments Are Processed	Near-field communication is used to transmit the data wirelessly.	An EMV chip or magnetic stripe is used to transmit data.
Speed	This method is very fast and often takes less than a second.	This method is much slower than NFC technology.
Security	Extremely high due to device authentication and tokenization.	Moderate, thanks to chips and PINs. However, magnetic swipes can be vulnerable to skimming.
Contact Level Required	No physical contact with the payment terminal is required.	The card must come in physical contact with the payment terminal.
Offline Capabilities	This payment method requires an internet connection.	Thanks to terminal authorization, this method may be used offline.
User Authentication	A fingerprint, face ID, or passcode is often necessary.	A PIN, signature, or chip is used to authenticate the transaction.
Convenience	Exceptionally convenient. Works with smartwatches, phones, and contactless cards.	Reasonably convenient. To use this payment method, the user must carry the physical card.
Availability	While it is widely available, consumers can only use this payment option if the company has an NFC-enabled terminal.	This established payment method is widely available.

What Do Merchants Need To Do To Implement Mobile Payments?

In order to process this type of payment, you must update your POS systems. Your company will need specialized chip readers, monitors, and embedded NFC technology. You also need to make sure that your new system is PCI compliant. 

Once you’ve decided on the best POS system for your needs, you’ll also need to train your employees on how to use the new system. They’ll need to understand how to process different payment types and when to ask customers for identification.

You’ll need to find the right payment processor for your company’s needs. Each processor offers different contract lengths, pricing, and services. By working with the experts at PayCompass, you can ensure your new POS system and payment processing tools are tailored to your company’s unique needs.

Are NFC Payments Secure?

This solution is incredibly secure for businesses because of how NFC payments work. Each time you use an NFC mobile wallet, the NFC technology’s added encryption, multifactor authentication (MFA) protocols, and range limits protect the transaction from fraud.

• Enhanced Encryption: During the transaction, the customer’s name and payment information are encrypted. This makes it extremely difficult for hackers to steal the information. Even if they manage to access the data, NFC transactions use tokenization, so the card number is different each time.
• Proximity and Range Limits: NFC communication occurs over very short distances, making it unlikely that a cyberattacker could steal the information.
• MFA Protocols: MFA techniques, like requiring a passcode or fingerprint, create an added layer of security. Even if criminals are able to take a device, they would need to crack the MFA requirements as well.

What Is the Difference Between NFC vs. Contactless Payments? 

While all NFC mobile wallets are contactless payments, not all contactless payments are NFC payments. Contactless payments are a name for the payment style, so they can be any type of payment that doesn’t involve physical contact. For example, RFID technology can be used for NFC payments.

Besides comparing NFC vs. contactless, there are also differences between types of NFC payments. NFC contactless payments are any type of contactless payment that uses NFC technology. Meanwhile, NFC mobile payments involve using a phone, a smartwatch, or a mobile device to make the payments.

How PayCompass Can Help Merchants Accept NFC and Mobile Wallet Payments

With the help of a specialized merchant services provider like PayCompass, you can get help understanding NFC tap-to-pay options. Our team can walk you through the POS systems, plans, and technology available for your business. Once you’ve decided on the best option, we can help you navigate employee training and security protocols.

At PayCompass, we use PCI DSS-compliant systems, tokenization, and chargeback prevention tools to protect your company’s bottom line. We always conduct a free cost and rate analysis with each business, so you’ll know exactly how much money you can save by switching to us. Through our top-rated customer experience and extensive experience, you can enjoy having a seamless transition to your new payment processing program.

Final Thoughts

NFC tap-to-pay options aren’t just a fun feature for trendy consumers. They are quickly becoming an in-demand technology that customers expect when they go to a company. By making sure you have this technology in your business, you can improve customer satisfaction. 

Besides boosting satisfaction, NFC mobile payments are an excellent way to speed up your transactions and improve your overall security. The state-of-the-art encryption, one-time-use tokenization, and range limits deter cybercriminals. Plus, the loyalty rewards and mobile wallet options help to improve customer engagement and retention.

For the best success at implementing this type of program, you need the right technology, equipment, and training. A skilled merchant services provider can help you accept NFC payments at your company.

If you’re ready to take the next step, give us a call. At PayCompass, we can help you switch your merchant services provider and adopt NFC technology at your business. Reach out to our payment processing experts today to learn more.