Kevin is at a fast-food restaurant and has just ordered his usual meal of a hamburger and fries.
When the cashier asks him how he would like to pay, he whips out his smartphone and taps it against the NFC-enabled payment terminal.
Welcome to the world of contactless payments.
With the number of contactless payments on the rise, the technology behind this – near field communication (NFC) – is becoming more important.
Here are eight things you need to know about NFC technology.
1) NFC is an advanced form of RFID technology.
RFID – or radio frequency identification – is a popular technology that uses radio signals to store data. You’ve probably seen it in action for tracking inventory and packages – especially in retail, ecommerce, and warehouse applications.
NFC is essentially RFID 2.0. It also uses radio signals for two-way communication, but unlike RFID, which operates at long distances, NFC has a much smaller maximum range of a few centimeters.
In a nutshell, NFC is as a short-range wireless radio transmission technology.
2) NFC is a technology standard.
Per the NFC Forum, “NFC is a technology standard that harmonizes and extends existing contactless standards unlocking the full capabilities of NFC technology for the different contactless operating modes.”
3) NFC has three different modes of operation.
NFC devices operate in three different modes: reader/writer mode, peer-to-peer mode, and card emulation mode.
The card emulation mode is used for contactless payments, ticketing, and more.
Meanwhile, the peer-to-peer mode facilitates the communication between two devices which are enabled for NFC so that they can quickly share and send information.
Lastly, the reader/writer mode allows NFC-enabled devices to read NFC tags, which are most often found in displays and posters.
4) There are three major players in the contactless payments market today.
Google Wallet launched in 2011 and continues to be one of the major players in the contactless payments market across the world. Just last month, Google announced the launch of their new app, Google Pay for Android, which replaces Google Wallet and Android Pay.
The other two major players in the market are Apple Pay and Samsung Pay. As of last year, Apple Pay was #1 in the market with 45 million users worldwide. Samsung Pay came in second with 12 million users across the globe.
5) Many current devices – besides smartphones – have NFC technology built right in.
As NFC has become more popular, many devices have begun to have built-in NFC technology. And this isn’t just limited to smartphones; you can now find NFC-enabled tablets, speakers, headphones, smart watches, laptops, and many more.
6) Credit card companies are starting to issue credit cards with contactless capabilities in the U.S.
New credit cards don’t just have embedded EMV chips. Now, major American credit card companies are also issuing credit cards with embedded chips and antennae that enable contactless capabilities just like NFC-enabled devices.
With these new contactless credit cards, consumers can now tap their card on a contactless-enabled payment device like a payment terminal instead of having to swipe or “dip” their card.
This technology is very prevalent outside the U.S. – especially for public transportation. In London, for example, most people pay for their train or bus rides by simply tapping their contactless cards.
7) If your customers want to pay for their purchases with their NFC-enabled devices or contactless credit cards, you need to have a device that’s enabled for contactless payments.
Wait a second, you might be thinking. I need to do another tech upgrade? Not so fast. Here’s the good news: it’s very likely that once you upgrade your restaurant hardware and software to be enabled for EMV, the upgraded technology will also be capable of processing contactless payments.
For example, the main EMV solutions that we offer at Midwest POS (see our full list of solutions here) can be used for contactless payments, too.
By upgrading your technology, then, you can kill two birds with one stone, and your customers can pay any way they want.
8) Contactless payments haven’t really picked up in the U.S. – but that could change in the future.
The technology is out there, but not everyone has jumped on the bandwagon in the U.S. Last year, for example, Phoenix Marketing International reported that the growth of Apple Pay and similar companies was flat.
And this isn’t that surprising. After all, it was only a few years ago that the EMV liability shift occurred. We also have more payment processors and financial institutions than other countries that implemented contactless payments/NFC technology earlier and use it far more often.
Many merchants aren’t ready for contactless payments, either. For example, per CreditCards.com:
“The Strawhecker Group estimates that 52 percent of merchants today accept chip payments, and only 36 percent have contactless-capable terminals. Even then, only 28 percent of POS terminals are activated to accept contactless cards.”
But this could change, especially as many credit card companies are expected to issue contactless credit cards over the next few years. ABI Research estimates that U.S. contactless card shipments could rise from an estimated 78.4 million in 2018 to an estimated 229.6 million by 2021.
Plus, contactless payments offer one major benefit in a world of almost too many ways to pay: consolidated spending. Studies have shown that too many choices can paralyze a consumer. More isn’t always better. Consumers want things simple.
In short, contactless payments offer simplicity, bring relief to your customers, and make the transaction both faster and hassle-free.