What Small Businesses Need to Know — Backoffice (2022)

For decades, some customers have approached credit and debit card payments with a degree of trepidation because they fear fraudsters stealing their card information through 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 terminals for payments. It works with both credit cards and chip-enhanced mobile devices, adding great convenience for today’s busy customers. NFC technology uses two-way encrypted communication, adding a layer 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 is near field communication (NFC) mobile payment?

Near-field communication is a radio communication protocol that allows two devices to communicate over a secure, low-speed connection. It enables contactless payment processing through 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 are embedded with radio frequency identification (RFID) chips that use NFC to communicate with payment terminals.
• Mobile phones, tablets and smart watches. Mobile wallet apps, which operate through software on a user’s smartphone, smartwatch or tablet, use the mobile device’s built-in NFC radio to communicate with NFC payment devices. Therefore, mobile wallet apps can be used in the same way credit and debit cards are used in tap-to-pay transactions.

How does NFC mobile payment work?

NFC mobile payments work by sending encrypted transmissions using near-field communication, a secure low-speed radio standard. NFC chips can be embedded in smartphones, smartwatches, tablets and even some laptops. These NFC devices run mobile wallet applications such as Apple Pay, Google Pay and Samsung Pay that are linked to the user’s credit card or bank account. Customers 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, is a point of sale (POS) payment terminal that functions as a credit card reader. These POS systems communicate with customers’ NFC devices just as they would with a chip-enabled credit or debit card. Both payment devices and payment terminals send encrypted messages, which makes it almost impossible for hackers to intercept financial data.

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

Advantages of NFC mobile payments

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

• Comfort. NFC mobile payments allow customers to leave their wallets at home. They can simply tap their mobile device at the 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 brick-and-mortar stores.
• Immediate processing. Although multiple encrypted transmissions bounce between the NFC device and the payment terminal, the entire NFC mobile payment process occurs almost instantaneously. The only thing customers must do is unlock their device using a fingerprint, face scan or passcode.
• Safety. NFC mobile payments use end-to-end encryption. They also require users to unlock their devices and provide authorization before initiating a payment. This adds a layer of security to the payment process and prevents the type of financial fraud that can occur with magnetic stripe transactions.

Disadvantages of NFC mobile payments

NFC technology adds convenience and security to the payment process, but it comes with some drawbacks.

• Requires special equipment. To accept NFC payments, merchants must invest in a special payment terminal equipped with the right type of NFC radio. In addition to paying for the equipment, merchants also have to pay an electrician to install these terminals in their stores.

• Transaction limit. 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 regular credit cards.

• 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 can unlock the phone and make purchases through the user’s mobile wallet account. To avoid this type of fraud, individuals should protect their Internet-connected devices with a fingerprint or Face ID in addition to a password or passcode.

Final thoughts

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

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

NFC payment 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 transmission in both directions, which makes it extremely difficult for fraudsters to intercept financial information. Additionally, users must unlock their device with a passcode, fingerprint or face scan before they can make NFC payments. This adds another layer of security.

How do I pay with NFC?

To pay using NFC, start by adding the 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 an NFC radio that enables these payments. Look for the radio wave logo that looks like four semicircles in a row.

Do I need NFC on my phone for mobile payments?

Yes, you need a phone with an NFC chip to make contactless payments. You can check your manufacturer’s specifications to confirm, but luckily, almost all contemporary smartphones come with a built-in NFC chip.

source: https://www.shopify.co.id/blog/nfc-mobile-payments