For decades, some customers approached credit and debit card payments with a degree of trepidation because they feared scammers stealing their card information via the card’s magnetic stripe. 

NFC technology has changed the game. Near-field communication (or NFC) is the technology that powers contactless payments and tap-to-payment terminals. It works with both chip-enhanced credit cards and mobile devices, adding immense convenience for today’s busy customer. NFC technology uses two-way encrypted communication, adding layers of security that traditional credit cards can’t match. This combination of security and convenience has inspired countless small business owners to accept NFC payments.

What are near-field communication (NFC) mobile payments?

Near-field communication is a radio communications protocol that permits two devices to communicate via a secure low-speed connection. It enables contactless payment processing via payment terminals known as NFC readers.

NFC mobile technology powers two different payment methods: 

  • Credit and debit cards. Modern versions of credit and debit cards come embedded with a radio frequency identification (RFID) chip that uses NFC to communicate with payment terminals.
  • Mobile phones, tablets, and smartwatches. Mobile wallet apps, which operate via software on a user’s smartphone, smartwatch, or tablet, use the mobile device’s built-in NFC radio to communicate with NFC payment devices. As such, mobile wallet apps can be used the same way credit and debit cards are used in tap-to-pay transactions.

How do NFC mobile payments work?

NFC mobile payments work by sending encrypted transmissions using near-field communication, a secure, low-speed radio standard. An NFC chip can be embedded in a smartphone, smartwatch, tablet, and even some laptops. These NFC devices run mobile wallet applications like Apple Pay, Google Pay, and Samsung Pay that tie to a user’s credit card or bank account. A customer can use the device to pay for something, and when they do so, the amount is charged to their credit card or debited to their bank account.

On the other side of the transaction, the vendor side, are point-of-sale (POS) payment terminals that double as credit card readers. These POS systems communicate with the customer’s NFC devices much as they would with a chip-enabled credit or debit card. Both the payment device and the payment terminal send encrypted messages, which makes it nearly impossible for hackers to intercept financial data. 

Users cannot send payments from their NFC device without granting authorization in the form of a fingerprint, facial identification, or a passcode. Thus, NFC mobile payments transmit all of the same payment information that a credit card transmits, but do so with multiple layers of security.

Advantages of NFC mobile payments

NFC mobile payments bring three distinct advantages to customers and businesses. 

  • Convenience. NFC mobile payments allow customers to leave their wallets at home. They can simply tap their mobile device at a point-of-sale payment terminal. This turns smartphones, smartwatches, and tablets into all-in-one payment devices that customers can use either over the internet or in a brick-and-mortar store.
  • Immediate processing. Despite the multiple encrypted transmissions bouncing between NFC devices and payment terminals, the entire NFC mobile payment process happens nearly instantaneously. The only thing a customer must do is unlock their device using a fingerprint, facial scan, or passcode.
  • Security. NFC mobile payments use end-to-end encryption. They also require users to unlock their devices and grant permission before initiating payments. This adds layers of security to the payment process and staves off the kind of financial fraud that can happen with magnetic stripe transactions.

Disadvantages of NFC mobile payments

NFC technology adds convenience and security to the payments process, but it does come with some downsides.

  • Requires special equipment. In order to accept NFC payments, merchants must invest in special payment terminals equipped with the right kind of NFC radios. Besides paying for the equipment, the merchant would also have to pay an electrician to install these terminals in their stores.
  • Transaction limits. Mobile wallet apps place transaction limits on their users, which can limit cart sizes and purchase amounts. Sometimes these transaction limits fall well below the limits placed on a normal credit card.
  • Only as secure as the user’s payment device. If a customer loses their mobile phone, or it falls into the hands of someone who knows their passcode, that other person could unlock the phone and make purchases via the user’s mobile wallet account. To prevent this type of fraud, individuals should secure their internet-connected devices with fingerprints or Face ID in addition to a password or passcode.

Final thoughts

Customers love the convenience of mobile payment apps, and mobile payments are surging. Global consumers spent $1.78 billion via mobile payments in 2021, and financial analysts predict that figure will more than triple within five years.

Small business owners are spotting this trend and adjusting their operations to accept mobile payments. By adapting to new customer preferences, you offer convenience and security to your clients, who in return can offer loyalty and appreciation.

NFC payments FAQ

Is NFC safe for making payments?

Yes, NFC technology is one of the most secure payment methods available to consumers. NFC devices use encrypted transmissions in both directions, which makes it exceedingly difficult for scammers to intercept financial information. Furthermore, users must unlock their devices with a passcode, fingerprint, or facial scan before they can make NFC payments. This adds yet another layer of security.

How do I pay with NFC?

To pay with NFC, start by adding a mobile wallet app to your internet-connected device. Popular mobile wallet apps include Google Pay, Apple Pay, Samsung Pay, Venmo, and PayPal. Connect your mobile wallet to an existing credit card, debit card, or bank account. Once you’re set up, you can pay via NFC at any retailer that has an NFC terminal. Most modern credit card readers have NFC radios that enable these payments. Look for a radio wave logo that looks like four consecutive semicircles.

Do I need NFC on my phone for mobile pay?

Yes, you do need a phone with an NFC chip in order to make contactless payments. You can check your manufacturer’s specs to confirm, but thankfully, nearly all contemporary smartphones come with a built-in NFC chip.



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