accepting NFC payments - person using a cell phone to pay

Taking NFC payments at your business

Monday, November 03, 2014

Over the last several years, many businesses have begun to accept contactless payments. Broadly, this refers to the process of customers purchasing an item at a retailer without inserting or swiping a credit card or debit card. Instead, they utilize a tap-to-pay method called Near Field Communication(NFC) payments. While NFC is not new – it’s been recognized since 2003 – its application as a way to send and receive payments is a more recent phenomenon. As these payments gain more traction, you should know more about how they work so that you can decide if accepting NFC payments is right for your small business.

This article will cover the basics of NFC technology, the security of NFC payments, accepting payments as a business and the future of NFC payments.

What is NFC?

To start, let’s talk about what NFC means and what it allows your business to do. As mentioned above, NFC stands for Near Field Communication. It’s a technology that enables data to pass from one device to another, granted the devices are close enough together. NFC only works for in-person transactions because of the proximity needed for a successful transaction. As the name suggests, the devices don’t have to touch, making it a contactless method of data transfer.

NFC can connect laptops, tablets, smartphones and other devices to each other and to payment terminals. This technology is what enables contactless card payments – by either EMV-enabled cards or mobile phones. Sometimes, NFC technology gets compared to Bluetooth®. However, there are a few differences: NFC doesn’t require as much power, works over shorter distances, and doesn’t require any form of device discovery.

When talking about NFC as a whole, there are three main modes of NFC:

  • Peer-to-peer (P2P) mode – This mode helps to transfer data between two devices. Each device serves as an endpoint, establishing a two-way street. That means each can send and receive data. Its primary use is transferring files between devices.
  • Reader/writer mode – This mode connects one active device and one passive device. The active device reads the data from the passive device and then sends data to the passive device. Debit/credit cards that have EMV chips use this mode in tap-to-pay applications.
  • Card emulation mode – This mode lets your device function as a credit card or other type of card. Besides credit cards, this mode can store loyalty cards, tickets, and identity cards. Mobile, contactless payments use this mode.
As you can see, the last two modes are used in NFC mobile payments. Now that you’ve learned what NFC payments are, let's dive into how the technology works specifically for payments to ensure a fast, safe and secure transaction.

How does NFC work? 

When customers want to purchase an item from your business, they have a few different payment options using NFC technology. 

First, they can use a physical, chip-enabled credit card and tap the payment terminal, if their card has NFC capability. Visa, MasterCard, American Express and Discover all have credit cards with this feature. Alternatively, they can activate their mobile payment card on their phone by opening their respective payment app, such as Samsung Pay or Google Pay on Android phones or Apple Pay on iPhone. For added security, the NFC function on mobile devices only activates when a user opens their mobile wallet. 

Once activated, NFC payment technology utilizes RFID (radio frequency identification) to pass data on radio waves from one entity to another using a particular frequency – 13.56MHz. This frequency only works when the two NFC chips are close together. If you’ve ever made a tap-to-pay payment, you’ve seen firsthand how close you need to be to the terminal for the payment to work. If too far from each other, the two NFC chips won’t talk to each other, and no transaction will occur.

Are NFC payments safe? 

At this point, you might be wondering, “How safe are NFC payments?” This is a common concern for small business owners who want to protect their customer’s data. The answer might surprise you: NFC payments are highly secure, akin to customers dipping their EMV chip cards. Here are a few reasons why NFC payments are so safe:
  • Proximity – As noted before, the devices involved in NFC payments must be very, very close to one another. Therefore, for a thief to intercept this type of transaction, they’d nearly have to stand on top of you! 
  • User-initiated – When standing near an NFC equipped terminal, the customer not only has to activate the NFC mode on their phone by opening their NFC payment app, but they must also pass a secondary form of identification to proceed. This second form of authentication could be a thumbprint, facial recognition, or a specific PIN code.
  • Singular connection – NFC only works between two devices. Therefore, an NFC payment terminal can only connect to one device at a time, making it impossible for someone to pay for the wrong order or get your customer’s credit card information.
  • Tokenization – While a mobile device acts as a customer’s credit card, a process called tokenization helps protect that sensitive data. Tokenization is the process by which confidential information (like your customer’s card number and other credit card details) is swapped for non-confidential information (a random string of numbers). The token can guarantee the same functionality of the credit card data while only being useful in a specific transaction. That means, even if a thief were to steal the token, it would be useless outside of the single transaction that just took place.
As you can see, NFC payments provide a whole host of security features to protect your business and your customers.

Accepting NFC payments 

Now that you know more about how NFC payments work and how secure they are, let’s talk about setting your business up to take NFC payments.

What you’ll need for NFC payments

While accepting NFC payments might seem like you’ll need futuristic technology, it’s surprisingly simple. You’ll need two main things to start accepting NFC payments; a payment terminal that accepts NFC payments and a payment processing plan that accepts mobile wallet payments

With the increase in popularity of mobile payments, most payment terminals are now equipped with NFC technology. Your current payment terminal could even have the capability to accept NFC payments, especially if you’ve upgraded your system recently. Once you have confirmed that you have the right equipment, you’ll work with your payment processor to add mobile wallet payments to your plan (if they are not already included). Mobile payments are becoming increasingly standard, so this may already be included in your plan. 

If you are concerned about incurring additional fees when accepting NFC payments, you’ll be happy to know that the fees for mobile payment processing are typically the same as credit card processing. But, as always, it’s important to discuss how your business’ exact plan works with your payment processor.


Benefits of accepting NFC payments

NFC payments can benefit both your business and the customer. Here’s how: 
  • Faster checkouts – NFC payments are much faster than other forms of payment. They beat cash transactions handily, they’re quicker than the magnetic stripe card, and they’re still faster than processing a normal EMV credit card. With shorter processing times, NFC  technology can save your customer time at the register while helping you process more transactions. This leads to more efficiencies for your business.
  • Ease of use – Mobile wallets keep your customer’s card right at their fingertips (or on their wrists with the use of smartwatches), so they no longer need to fumble in their wallets, purses or pockets to find their credit cards. In an age where almost all customers never go anywhere without their phones, they’ll always have their card. And without having to insert the card, this minimizes the hangups that commonly occur when customers insert their cards incorrectly.
  • Increased security – As we’ve discussed, increased security measures make NFC payments safer than other payment methods. This increased security can give customers peace of mind purchasing from your business. For your business, it means more protection from fraud claims and chargebacks.
  • More hygienic – As more customers choose contactless payment options, the spread of germs that usually would come from customers touching the payment terminals lessens, leading to fewer germs and a cleaner environment at your business. It also eliminates the physical contact of a credit card being passed from customer to employee and back.
  • More customer engagement – Accepting NFC payments also allows you to increase sales and retain customers. How? NFC payments can provide a seamless checkout experience, including the incorporation of dedicated apps and coupon acceptance. This elevated customer experience can deepen customers’ relationships with your business.

The future of NFC payments

As our world shifts to becoming even more cashless, businesses will see an increase in cashless payment options, including more reliance on NFC payments. While many think of risk as related to credit card fraud when paying with a credit or debit card, the ongoing coronavirus pandemic has shown that risk at the payment terminal now includes the physical act of inserting payment cards. One result is that consumers and businesses alike are utilizing NFC payments more to protect themselves and their health. As the COVID-19 pandemic has forced the adoption of contactless payment solutions, it’s even more imperative for your business to offer this payment option to customers.

NFC payments and cryptocurrency

As interest in cryptocurrencies rises, consumer interest in payment security has also grown. If businesses wish to accept cryptocurrency in-person in the future, they’ll need to ensure they have NFC payments enabled to accept these types of payments. Technologies are currently in development that allow cryptocurrency owners to store their information on a card to use at a merchant’s terminal using NFC payments. 

The increase of digital wallets and mobile payments is a sign that NFC payments are here to stay. With their ability to provide fast, safe and secure payments, NFC payments can help you protect your business and your customers.

Ready to start but need a partner that can help you accept NFC payments?

Heartland is the point of sale, payments and payroll solution of choice for entrepreneurs that need human-centered technology to sell more, keep customers coming back and spend less time in the back office. Nearly 1,000,000 businesses trust us to guide them through market changes and technology challenges, so they can stay competitive and focus on building remarkable businesses instead of managing the daily grind.