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Everything You Need to Know About NFC Mobile Payments
Digital wallets are quickly gaining in popularity. Learn the ins and outs of NFC payments to determine if your business should start accepting digital payments.
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Near-field communication (NFC) mobile payments are a type of digital payment used among consumers of all ages. Below, we’ll explain what NFC mobile payments are, their pros and cons and everything else retailers need to know.
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What is an NFC mobile payment?
An NFC payment is a contactless payment made using NFC technology via a smartphone, smartwatch or NFC-enabled credit or debit card. This technology supports wireless communication between the NFC-enabled card or device with the merchant’s payment terminal.
Customers use NFC payment technology via the following methods:
- NFC-enabled cards: If you have a credit card with a contactless payment symbol, it has NFC capability. Use it to pay by tapping it on a compatible card reader.
- Digital wallets: A digital wallet is a mobile app that stores payment methods digitally on their smartphones. Consumers complete NFC mobile payments by holding their device near a payment terminal displaying the NFC symbol.
Digital wallets are the primary driver of NFC mobile payments. According to Statista, mobile wallets account for about half of all global purchases in-person and online. Additionally, according to the Commerce and Payment Trends Report, 60 percent of the global population is expected to use digital wallets by 2026.
How does an NFC payment work?
NFC technology uses the radio frequency waves already used by mobile phones, which work typically within 1.5 inches (about four centimeters) from the card reader or payment terminal.
- NFC-enabled card payments: Hold or tap NFC-enabled cards near a compatible reader instead of swiping or inserting.
- NFC payments via a digital wallet: Users first enter their bank account or credit or debit card information into the wallet app of their choice (e.g., Apple Pay, Google Wallet). They can then hold their mobile device near the reader to initiate payment within seconds.
Are NFC mobile payments secure?
NFC payments are wireless and are considered safer than magnetic stripe cards. They offer the same level of security as EMV (chip) cards because they use tokenization and dynamic encryption.
Here’s how it works:
- The system assigns a unique, randomly generated string of numbers and letters. They instruct the merchant services provider on how to access funds for the transaction.
- Each transaction generates a one-time code so it’s nearly impossible to decode and can’t be reused for future purchases.
- NFC mobile payments provide security with a unique login and password or biometric authentication, such as Apple’s Face ID. The NFC payment data remains inaccessible if a customer loses their phone.
Still, NFC mobile payments carry some potential risk for consumers. Malicious apps that contain malware or fraudulent links lead to phishing attacks are other potential risks.
“For example, a fraudster may be able to access someone’s payment data if the terminal isn’t properly encrypted,” said Brittany Allen, senior trust and safety architect at Sift. “Lost or stolen NFC-enabled devices like smartphones also pose a risk, especially if not secured with strong authentication like PIN codes or biometrics.
“Equally important is having robust fraud detection systems in place to identify unusual transaction patterns and other suspicious activity before any data is compromised,” Allen added.
What are the pros and cons of accepting NFC payments?
Consider the following pros and cons when deciding whether to accept NFC mobile payments at your business.
Pros of accepting NFC payments
- Are highly secure, thanks to encryption and tokenization.
- Enable fast and seamless transactions.
- Are convenient for customers.
- Reduces the need for cash or physical cards.
- Allow retailers and restaurants to accept credit cards on their phones.
- Create a more efficient checkout experience.
- Can help you attract more Gen Z and millennial customers.
- Don’t incur surcharges from mobile wallet providers; merchants only pay the standard credit card processing rate for the customer’s stored payment method.
Cons of accepting NFC payments
- Businesses must purchase or lease NFC-enabled card readers.
- Merchants must work with a credit card processor that supports NFC payments and mobile wallet providers.
- Not all customers use NFC payments — some may prefer cash, traditional cards or other payment methods.
- Older payment terminals don’t support NFC, requiring hardware upgrades.
- NFC transactions require a stable internet connection, which is a challenge in areas with poor service.
What are the best NFC mobile payment apps?
Apple Pay, Google Wallet and Samsung Wallet dominate the mobile payment market.
“Other providers may not have the same market share because Apple, Samsung and Google all have an advantage as well-known hardware providers for consumers,” Allen said. “They also offer users a smooth and convenient experience by easily integrating with their broader tech ecosystems.”
Allen further cited these companies’ robust security focus as a reason for their digital wallets’ success. “Their investment in advanced security features like tokenization, encryption and biometric authentication (and partnerships with well-known merchants) also contributes to their widespread acceptance.”
Apple Pay
Most businesses accept Apple Pay, a payment method linked to the Apple wallet and conveniently preloaded on all iOS devices. According to Capital One Shopping research, Apple Pay is the top NFC payment method, boasting a 92 percent market share, and, according to Statista, 500 million worldwide users.
You can use Apple Pay once you’ve added payment cards to your Apple Wallet. You can also use Apple Pay in person, online and via mobile apps by selecting the Apple Pay option.
Apple Pay uses tokenization, meaning that encryption occurs at the issuing bank level and Apple doesn’t have an unencrypted copy of customers’ payment information. This, combined with Face ID authentication, makes Apple Pay one of the most secure NFC mobile payment apps.
Google Wallet
Google Wallet is Google’s mobile payment service. According to Statista, about 30 percent of U.S. survey respondents said they’ve used Google Wallet at a POS terminal, while another 30 percent indicated online usage.
It’s available on both Android and iOS devices. Most Android devices have built-in support for Google Wallet, enabling users to store payment cards, event tickets, passes and more. Additionally, users can send money to other Google Wallet users or transfer funds directly to friends’ bank accounts.
Samsung Wallet
Samsung Wallet is limited to Samsung smartphones that run Android 9 or later and support NFC mobile payments. This digital wallet supports NFC and magnetic secure transmission (MST) technology, enabling transactions at more payment terminals than competing digital wallets. However, MST doesn’t work at gas station pumps or ATMs that require physical card insertion.
Samsung Wallet has the smallest market share of the major mobile wallets and is used by roughly one in 10 Americans.
What are the best payment facilitators for NFC mobile payments?
Payment facilitators such as PayPal Zettle and Square allow you to accept multiple types of NFC mobile payments. Here’s what you should know about these top options:
- PayPal Zettle: PayPal Zettle (formerly known as iZettle) allows you to accept Apple Pay, Samsung Wallet and Google Wallet using its readers or Zettle’s POS system. This reader can function as either a mobile or fixed payment terminal when paired with a charging dock.
- Square: Square lets businesses accept Apple Pay and Google Wallet using the Square Reader or Square Register POS system for contactless and chip payments. If you prefer to use your own iPad with Square’s POS software, purchase a Square Stand and connect it to the Square Reader for a fully integrated solution.
