How NFC technology is used to accept credit card payments
In near-field communication (NFC) two devices equipped with NFC chips are placed close together or touching in order to exchange data of some type. The technology has many applications and NFC is beginning to ramp as an enabler of secure mobile payments made through NFC-ready credit card terminals. Several large US retailers already have NFC-based contactless payment terminals in their stores, which will help to ease the transition to accepting credit cards and overall NFC device adoption for more retail locations.
What is NFC?
Customers' smartphones store the NFC payment application and card account information in a secure area. When a customer chooses to pay using NFC technology, his or her phone communicates with your contactless NFC-enabled payment terminal. The two main formats of NFC are:
- Two-way NFC. In this technology, two devices that both have the ability to read and write to each other exchange information via their NFC tags. When two people touch their smartphones together to exchange contact data, they are using two-way NFC.
- One-way NFC. In this technology, one device reads and writes to an NFC chip. Examples of one-way NFC include a phone, credit card reader or commuter card terminal.
Though NFC has many of the same capabilities as Bluetooth technology, NFC uses a lot less power to transmit data. This power savings will become increasingly important as consumers use their smartphones to complete more routine, daily tasks, such as paying for everyday purchases using the digital wallet on their smartphones. What’s more, NFC chips contain residual power so they’ll continue working for a while even after the device’s battery has died.
Many of today’s most popular smartphones and other devices support NFC technology, including iPhone 6 and 6 Plus. View the current list of phones that support NFC technology to see if your devices support this emerging payments technology.
Is NFC a secure method for accepting credit cards?
Concerns about security have been the biggest factor in slow adoption of NFC and other contactless payments technologies. You might be surprised to learn that using a phone as a mobile wallet is nearly as secure as using a plastic credit or debit card. In fact, hacking or intercepting NFC payments is exceedingly difficult due to the complex mobile payments structure. Here’s how processing a transaction using NFC works for you and your customers:
- Customer opens payment application on his or her smartphone.
- Customer touches the phone on your POS terminal and a connection is made using NFC.
- Payment application prompts customer to verify payment via fingerprint (biometric) identification or by entering a preset passcode.
- A separate chip—the secure element (SE)—validates the transaction.
- If authorized, the SE sends the authorization back to the NFC modem.
After that, the transaction completes processing just like a credit card swiped transaction, traveling from the terminal, across the network and to the bank for payment. The SE is the most important part of the NFC mobile payment transaction because it holds all of the authorization power. If the SE does not approve the transaction, it has zero chance of being authorized or submitted. The SE is tamper-proof and protected by a unique digital signature.
What’s next for NFC?
As more consumers become familiar with and accustomed to the convenience of using their phone to make everyday purchases, the more the use of NFC payments will grow. NFC mobile contactless payments are accepted at both attended POS locations, like retail stores, and unattended locations, like vending machines. This flexibility will only add to the speedy adoption of NFC payments technology. Vantiv can provide more information on how NFC is used and will be used in innovative payments processing and credit card acceptance.