As per a survey conducted by MasterCard, 17,000 consumers in 19 countries perceived contactless payments as "the better way of paying”. By 2025, the global market size of NFC is anticipated to touch $49.5 billion. Customers increasingly prefer contactless payments to avoid the threat of infection by touching at POS (Point of Sale) devices, owing to the continuing COVID-19 outbreak. Banks and card issuers would be wise to take advantage of the upswings in NFC based contactless payments triggered by the pandemic.
People are gradually embracing mobile devices to manage day-to-day activities like emails, personal banking, and health apps. Owing to these developments, NFC mobile payments are rapidly gaining traction. As time goes on, more and more customers will prefer to pay using their mobile phones due to faster data processing, stronger data security, and better customer-centric functionality.
How Does NFC Function?
NFC is a type of high-frequency near-field wireless communication that is widely utilized in RFID (Radio Frequency Identification) based applications. With the use of radio waves that are similar to RFID labels used in warehouses and stores, both the devices establish a contactless connection. A unique RFID frequency of 13.56MHz is used by NFC chips, which functions similar to Bluetooth and enables two local devices to exchange data over a secured network when they are positioned close to each other.
NFC equipped devices can communicate with contactless payment cards using EMV Contactless Communication Protocol Specifications (EMV CCPS). However, the proprietary payment transaction protocol differs from EMV CCPS which is utilized for the actual card-to-terminal communication.
Mobile devices such as smartphones, laptops, or tablets can share data through NFC's wireless data transmission mechanism that allows devices in close proximity to exchange data. NFC technology also enables mobile wallets to accept contactless payments. Owing to the growing importance of NFC in mobile payments, most users believe proximity control to be a key security element.
Modes of Transfer in NFC
Peer to Peer
Useful for file transfers, this mode permits data sharing between two NFC-enabled devices.
In the reader/writer mode, one device performs passively whilst the other one performs actively. The passive device transmits data to the active device. For example, contactless debit/credit cards operate in this way.
Card Emulation Mode
Mobile payment apps leverage this mode wherein the smartphone acts as a digital credit card.
Contactless Payments via NFC
The ISO/IEC 14443 standard is used for NFC payment transactions between a mobile device and a PoS terminal. Mobile wallets manage and facilitates payments for NFC-enabled mobile devices. When this happens, an electromagnetic induction link is generated between the device and the PoS terminal. With NFC payment, a one-time unique code is generated, and the card details of the user are captured in the wallet in an encrypted format.
NFC Enabled Contactless Cards
The transaction can be completed by waving or tapping the card reader. As the active device, the card reader is responsible for reading card information from the passive NFC-enabled card. Physical contact between the card and the card reader is not needed.
How Card Data is Stored in NFC Enabled Apps?
Secure Element (SE)
A controlled access interface prevents tampering with the device, which can be compared to a smart card in the phone. It is used to store sensitive card details. SE relies on tokenization which is embedded into the device. The credit card token generated by the user is saved in SE.
Host Card Emulation (HCE)
By using Host Card Emulation, mobile applications can offer secure payment card and authentication solutions eliminating the requirement for a physical payment card. HCE is cloud-based and can be used as a card on any NFC-enabled device. Through HCE, the mobile payment app stores the users' credit card information on cloud servers.
Solutions like Host Card Emulation Solutions are contactless payment solutions with a unique HCE SDK and NFC solution that supports PA-DSS standards. All forms of payment cards are supported through the end-to-end tokenized technology, which allows for easy integration. It integrates itself easily with existing wallet and banking systems through RESTFUL APIs and supports multiple channels and compliant with global standards.
Security of NFC Payments
For some consumers, the concept of payment using a mobile device can be unsettling. Consumers need to know that their data, as well as their money, is secure even through online mediums. Banks, credit card companies and merchants care about the security of their systems and consumers.
When it comes to digital transactions, NFC payments are regarded as exceptionally safe. For instance, the data on a magnetic-stripe card is static, while the data transferred through NFC payments is encrypted and dynamic making it a safer method of payment.
A Closer Look at the Future of NFC and Contactless Payments
Payment is the most widespread use of NFC. Customer card information is safely stored on mobile phones with the advent of NFC contactless payment systems. Payment can be made with only just a few taps on phones or in the proximity of the NFC reader.
Customers, shops, and banks use NFC payments to make seamless, quick, and socially remote transactions. The system is relatively maintenance-free once installed. NFC payments are usually regarded as secure by experts and it is successful at preventing frauds, including cases of in-store counterfeit cards. Even though NFC has such a wide range of uses, the world is slowly adopting it. It will, however, be widely accepted by consumers, and a lot of prominent businesses in the retail industry will use this technology on a large scale.
These days NFC payment feature is found in every new smartphone available in the market, but what can you do with it? Simply hold your smartphone close to the contactless payment terminal available at a local grocery store, train station, cab or coffee shop, and the transaction will be completed.