Near field communications (NFC) is the latest technology to hit the credit card processing industry. Although it has much potential, there are also some critical issues that need to be resolved before its acceptance is assured.
NFC is a set of standards that allows chip-equipped smartphones to establish radio communications with a reader module when they are in very close proximity or touching each other. Its current and future applications include contactless transactions, mobile phone payments and data exchange.
An NFC transaction begins at checkout when a consumer waves or taps their smartphone near the merchant’s NFC reader. In some cases, the customer is required to authenticate the transaction by entering a PIN (personal identification number). Payment is deducted from a pre-paid account or charged to a designated credit card, so there’s no need for the customer to pull out a wallet or credit card to complete the sale.
NFC transactions are convenient, quick and compatible with coupon and special offer redemptions, making it an excellent marketing tool for merchants who want to draw in customers. NFC is also touted as being more secure than a credit card, which can easily be stolen and used to make unauthorized purchases. While the odds of a hacker successfully breaching the wireless signal are small, however, security is still an issue with NFC.
NFC converts like it for a variety of reasons. For example, tracking spending is simplified because receipts are automatically stored and an ongoing record of expenses can be accessed at any time. By linking payment to a reloadable prepaid card, NFC users can benefit from the convenience of using a card without the worries of running up credit card debt and mounting interest payments. Many smartphones currently on the market are equipped with NFC technology, and their numbers of expected to grow. Some phones may even be retrofitted to support NFC.
Contactless mobile phone payments were introduced in the U.S. last year with the launch of Google Wallet, which is currently limited to users with one brand of mobile phone on one network. More options are expected this year from Isis, a joint venture of Verizon, AT&T and T-Mobile.
Despite the very real challenges facing NFC in this country, it appears inevitable that this new “tap and go” technology will be adopted here in time with the cooperation of phone manufacturers, banks and merchant services providers like TransFirst®. Retailers and service providers should be ready to adapt their operations to accept NFC shoppers as it becomes more widely available.