NFC Payments Explained: What Are They and How Do They Work?
NFC payments are a type of contactless payment that uses near-field communication to securely share customers’ payment data. Digital wallets have boomed in recent years because they’re more secure than credit card or debit card payments.
Your customer just holds their iPhone or Android mobile device up to the card reader. The caveat? Your customer’s device has to be about 2 inches from your card reader to process the transaction.
Mobile wallets are booming payment methods. In fact, 2.7 billion people will use one or more payment apps by the end of 2022. As such, most payment processors now offer NFC readers along with the payment gateways they provide.
Let’s take a look at everything you need to know about NFC payments including how they work, the benefits of offering them, and how to implement them in your small business.
What are NFC or contactless payments?
NFC payments allow customers to bypass their credit or debit cards. Instead of taking the customer’s Mastercard or Visa at your POS station, your business can accept their card information digitally. Customers just hold their device up to your card reader to exchange payment information right from their smartphone.
NFC payments reduce the risk of pathogen spread at retailers’ point-of-sale stations. They’re more secure than chip cards, and customers can pay with NFC in a few different ways. NFC mobile payments work with touch-free credit or debit cards and customers’ smartphones. Highly popular third-party payment services providers like Google Pay and Apple Pay also use NFC technology.
How do NFC payments work?
NFC payments use a technology that’s similar to RFID (radio frequency identification) to share customers’ card numbers with your business. Implementing NFC payments is a great way to simplify the checkout process. They’re more secure than other payment options, such as swipe or EMV chip cards. Let’s take a look at two of the most common ways that business owners use NFC technology to simplify card transactions.
Contactless credit cards
Contactless cards (or tap-to-pay cards) can be physical cards or wearable payment wristbands. Customers use their cards to share their payment data. It’s pretty similar to EMV chip reader functionality. The difference is that contactless credit cards don’t need to be inserted or swiped. Instead, they can be held up within about 2 inches of your card reader to share payment info.
NFC mobile payments
NFC mobile payments work through mobile wallet providers like Google Pay, Apple Pay, and Samsung Pay. With mobile wallet payments, customers just pull up their card info at your payment terminal through facial or thumbprint authentication. They then hold their phone up to your NFC-enabled card terminal to process transactions for a more secure payment experience.
How safe are NFC payments?
Speaking of safety, keeping customer payment data safe is paramount to your small businesses’ reputation. NFC payments are one of the safest payment technologies on the market. Since they operate over customers’ smartphones, hackers can’t use a swipe reader to steal their card info. It works similarly to the Bluetooth network. So a would-be data thief would have to be within 2 inches of the transaction to steal customer data.
But that’s not the only form of protection offered with NFC payments. Customers can use facial ID, their fingerprint, and/or two-factor passcode authentication to access their mobile wallets on their mobile phones. Each NFC transaction is also tokenized, meaning customers’ credit card numbers are replaced with one-time-use letters. This prevents hackers from gaining access to customers’ payment data as it travels to and from their bank for authentication.
Key benefits of accepting NFC payments
Compared to card payments, NFC payments are incredibly secure. Another way to increase payment security is by ensuring that your payment device is PCI compliant. Your payment processor can help with this. And there’s no lack of customer demand for retailers to go digital. In fact, a whopping 74% of customers prefer digital payments.
Got a need for speed at your payment reader? NFC payments can put you at a distinct advantage in terms of checkout line traffic. Mastercard found that contactless payments are 10X faster than traditional credit cards, debit cards, or check payments. So, while customers opt for NFC payments for their security, retailers adopt them for their convenience.
How to implement NFC payments in your business
Here’s some good news if you’re ready to roll out NFC payments at your SMB: the process is relatively simple. You’ll just need NFC-enabled hardware to get started. However, investing in a quality NFC card reader can future-proof your business as new payment gateways are rolled out.
Costs of accepting NFC payments
The pricing of an NFC-enabled credit card reader or terminal will vary depending on your payment services provider. However, NFC-enabled payment processing equipment generally falls within the $50 to $300 range. If you’re asked to pay more than this, it may be time to reevaluate your relationship with your payment processor.
No other payment method matches the secure element of NFC payments. In fact, apps like Google Pay only work with NFC-enabled terminals. Because of this, we should be talking about the cost of not accepting NFC payments. They represent a growing percentage of transactions at retailers’ POS systems.
Fortunately, NFC-enabled hardware is the only thing you’ll need for your SMB to begin accepting NFC payments. No additional investment is required on your part.
The bottom line
NFC payment solutions are a safer, faster alternative to credit card processing. Roll out is easy. You’ll just work with your payment processing provider to determine what NFC-enabled payment technology is right for your business.
With that said, you need a payment processor that provides NFC-enabled payment gateways to process transactions. But some payment processors do a lot more for your business than simply enabling NFC transactions.
Payment Depot helps small businesses like yours save an average of $400 a month or more on credit card processing. Partnering with a membership-style payment processor like Payment Depot is a great way to recoup the cost of new hardware.
Plus, you’ll gain access to their award-winning customer service team to support you throughout your process. Contact us today to learn more.