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- NFC is a technology that allows card readers and certain devices to communicate over a short distance.
- NFC payments can be accepted using Androids, iPhones, laptops, tables and smartwatches, as well as NFC-enabled credit cards.
- NFC is very convenient for businesses and presents very little additional risk.
- This article is for small business owners interested in flexible payment processing options.
What are NFC mobile payments?
NFC mobile payments are a contactless electronic payment option that rely on near-field communication technology to communicate between hardware like phones, tablets or credit cards and NFC-enabled readers. This technology allows businesses to accept payments quickly and conveniently from customers without requiring employees to handle cash or cards.
NFC mobile payments are an ideal payment processing option for a range of businesses, including retailers, restaurants and professional service providers. Businesses that choose to accept NFC payments should expect to pay fees consistent with normal credit card processing charges (a few cents per transaction plus a couple percent of the transaction value).
And, while many modern credit card readers are NFC-enabled, some businesses may need to purchase a dedicated reader for $50 to $150.
What is NFC?
NFC stands for near field communication and refers to the technology that enables communication and data-sharing between wireless-enabled devices that are in close proximity to each other. NFC has many applications including access control systems, ID verification, and pairing wireless devices.
NFC is also easy to use. Accepting NFC mobile payments is very much like using a traditional credit card with a magnetic strip. In fact, many card readers are enabled to accept NFC payments – the difference is that with NFC a transaction is initiated not by reading a magnetic strip on a card, but by having an NFC reader send a signal which is picked up by an NFC antenna on an NFC-enabled device.
How do NFC mobile payments work?
NFC payments work by having a reader that, when initiated through a point of sale system, sends a signal looking to communicate with an NFC-enabled payment device. When the antenna on an NFC-enabled device (a phone or NFC-enabled credit card, for example) is detected by the reader, the payment device communicates the payment info to the reader, and the payment is processed.
So, accepting NFC payments starts with picking a payment processing company that offers NFC-enabled technology. The business then sets up a merchant account with their bank or processing company, connects the card reader and starts accepting payments using the installed NFC reader.
6 steps to process NFC mobile payments
- Pick a payment processor
- Choose NFC-enabled reader
- Install reader and software
- Connect to internet
- Set up merchant account
- Accept payments
Once you process payments for your business using an NFC reader, the proceeds will go directly into your merchant account, just like normal credit card transactions. Often, these proceeds are automatically transferred into your business bank account the following day, but you may need to initiate transfers periodically to sweep your balance.
Types of businesses that use NFC payments
NFC payments are a great option for many different types of businesses. It’s almost never the only option offered, but it’s a great benefit for many customers, as well as a convenience for company staff – especially for businesses like retailers that process lots of payments everyday.
- Brick and mortar retailers. Clothing stores, antique dealers, home goods stores and others.
- Mobile retailers. This includes street vendors, flea market booth operators and other mobile operators.
- Restaurants and food trucks. NFC is especially great for those that do a lot of carryout business.
- Healthcare providers. Doctor and dentist offices, therapists, counselors and pharmacists all get added convenience with NFC.
- Fitness and recreation facilities. This includes gyms, physical therapists and other recreational facilities that serve individual consumers.
- Charities and non-profit organizations. NFC is great when hosting events or processing payments for mobile fundraisers.
- Professional service providers. Not many attorneys or accountants accept NFC payments, but many professional service centers do.
While NFC payments are great for many types of businesses, they’re not great for entrepreneurs or companies that don’t accept credit cards. If you already accept credit cards, then offering NFC may be a big benefit; but, if you’re a consultant or operate a cash business, then NFC may not be helpful.
Types of devices that support NFC mobile payments
Businesses that want to process payments using NFC will need an NFC reader. Once they have an NFC reader hooked up to their POS, businesses can allow customers to pay for transactions using a number of different types of devices, including:
- Smartphones. Both Androids and iPhones offer apps to allow for mobile payments.
- Smartwatches. Watches with a wearable OS often support NFC.
- Tablets. Like phones, tablets can also be NFC-enabled, though a little awkward to handle when initiating payments.
- Laptops. Using a laptop to process a payment would be clunky, but it’s technically possible.
- EMV-chipped credit/debit cards. Most major credit cards issued today have EMV chips installed and support NFC technology. This is the most common form of contactless payment device.
Are NFC mobile payments safe?
NFC payments are generally considered safe as a payment acceptance method – the technology is every bit as secure as normal credit card processing. The only difference is that the risk of fraud can be slightly higher with NFC, since businesses often aren’t handling customers’ NFC-enabled devices to verify their identities.
If anything, concerns regarding NFC security are more common for consumers than businesses. Some potential problems from a business perspective include:
- Proximity. Users have to be within inches of an NFC reader in order to initiate transactions.
- Fraud. It’s harder for businesses to ensure that a customer has the right to issue payment using their NFC-enabled device, since they rarely handle the device being used for payment.
- Hacking. NFC payment records can be hacked, just like anything else.
- User-driven. Customers have to know how to initiate payments in order to properly use their NFC-enabled device.
Also, higher risk of hacking. For that reason, NFC technology is generally less secure than other payment methods, including traditional swipe transactions, but only slightly.
The primary security risk of NFC mobile payments is that they rely on a wireless signal. Also, because payment is contactless, cards are not typically handled by staff. Increases risk of a card being used fraudulently in your business
Pros and cons of accepting NFC mobile payments
Accepting NFC mobile payments allows businesses to grant customers a great deal of convenience and flexibility. But it also presents some unique risks for the business. Here are some other advantages and drawbacks of using this technology.
Pros
- Convenient for businesses and customers. Customers can use many different devices for payment, and company staff don’t need to handle the device.
- Appropriate for a wide range of businesses. NFC technology can be used across a range of applications by businesses in many different industries.
- Facilitates seamless payments. Payments fund within 24 hours and often transfer to the business’s checking account the following day.
- More secure than other payment methods. Many NFC devices have multi-factor authentication that make it hard for payments to be intercepted when being processed.
Cons
- Can be expensive, especially for large businesses. Businesses processing credit card or NFC payments pay several cents per transaction, plus a percent of the total transaction value.
- May be susceptible to security issues. Like other credit card transactions, payments processed using NFC can be hacked.
- Higher potential for fraud. Because a business’s employees don’t typically handle customer devices when initiating NFC payments, they aren’t usually verifying that the customer has the right to spend funds using the NFC device presented.
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