Consumer shopping behaviors have changed dramatically in the last decade, and merchants must keep up with customer shopping preferences — including the desire for fast, secure, and convenient payment methods.
Luckily, advances in payment technology, such as near field communication (NFC) payments, pave the way for an improved experience at checkout. In this post, we’ll dive into the ins and outs of NFC mobile payments, including what they are, how they work, and how to implement them in your business.
What are NFC mobile payments?
NFC payments occur when a mobile wallet or an enabled credit or debit card communicates with a payment terminal, sending encrypted payment information from the customer to the retailer.
Mobile wallets are more prevalent than ever, and as a result, NFC mobile payments are also more commonplace. Customers who want an added layer of convenience and protection can use their mobile devices with Apple Pay and Google Pay at retailers whose POS devices support tap-to-pay with cards and mobile payments.
Tap-to-pay cards are now being issued in greater numbers as old cards expire, and banks send replacement cards with this capability enabled by default. Cards with this function have a symbol on them resembling a sideways WiFi icon.
How do NFC mobile payments work?
Near field communication technology connects the two NFC-enabled devices in close proximity to one another—usually a few inches at most—to transmit payment information. A key differentiator with NFC mobile payments is the use of tokenization, making this a significantly more secure payment option than swiping a magnetic stripe card or even inserting a standard EMV chip card.
The card information is encrypted when sent to the payment terminal, and it also requires authorization from the mobile device with either face ID, fingerprint, or a passcode. Once validated, the device transmits a token—a randomly generated, one-time-use cryptogram—to the NFC terminal. This token replaces the customer’s actual card number (PAN) and is meaningless if intercepted, ensuring the merchant’s system never handles sensitive card data.
Card information is not transmitted in a way that hackers can use, and the one-time code which sends encrypted payment information cannot be used again, making it useless to hackers. This combination of short-range communication, biometric or multi-factor authentication, and tokenization makes NFC payments virtually immune to skimming and unauthorized accidental charges, ensuring the highest level of security available in physical payment processing.
Addressing safety concerns with mobile payments
Despite NFC’s above-mentioned security capabilities, some consumers are still hesitant to use mobile wallet payments or the tap-to-pay function of their cards. However, confidence in NFC payments is increasing, especially in younger cohorts, where 65% of people aged 18-24 and 55% of people aged 25-44 state they are either very or somewhat likely to make tap-to-pay purchases.
Digging deeper into customer hesitancy about NFC payments reveals an opportunity to educate customers and ease their concerns. Common reasons for late adoption from customers include hesitation about payment security and uncertainty about how to make the payment. Fortunately, NFC-enabled payment devices accept traditional card payments, and customers can choose what feels right for their comfort level.
Other reasons to consider contactless payments
Providing a safe shopping experience goes beyond sanitation protocols while customers are shopping. In any retail environment, payment terminals at checkout get a lot of activity. While retailers would like to sanitize between shoppers, in practice, this is often untenable. And while customers may still need to use the terminal’s screen to complete their transaction (for tip, signature, or loyalty prompts), the payment itself is truly contactless. This minimal interaction with the payment terminal offers a hygienic benefit and significantly reduces touchpoints compared to chip-and-PIN..
Contactless payments are also highly convenient for customers, and allowing this as an option lets them pay on their terms. Many new credit and debit cards are also equipped with tap-to-pay embedded in the card. This is beneficial to merchants because the same technology needed to accept mobile payments is used for contactless credit and debit card payments.
The rise in the popularity of contactless payments has been steep in the last few years. The US was initially slow to adopt NFC payments; sources indicated that as of 2018, only around 3–4% of cards in use were enabled for contactless pay. However, propelled by the shift to chip cards and the pandemic, adoption has exploded. Today, contactless transactions account for over 25% of all U.S. card transactions (as of 2023), proving that this technology is now mainstream..
How merchants accept payment is also closely tied to customer service. Honoring all payment types builds loyalty and makes the shopping experience smooth and convenient from start to finish. Keeping an updated POS system also instills customer confidence that the business takes speed and security seriously.
How can merchants implement NFC mobile payments?
To implement NFC mobile payments, merchants must have the correct equipment. NFC mobile and other contactless payment terminals are typically integrated devices that feature embedded NFC technology, EMV chip readers, and a magnetic stripe reader. As a Stax customer, you’ll have access to a range of modern, NFC-enabled payment terminals that suit your unique business environment—from countertop POS devices to mobile card readers.
The first step in adopting contactless payment terminals is figuring out which one is best for your business.
There are many advanced POS technologies on the market, and the size of your business and customer profile, along with other unique business needs, will determine which POS system and payment terminal is the best fit. For example, a restaurant will have a different point-of-sale needs than a small clothing retailer. When consulting with your payment processing provider, it’s important to discuss these needs so the appropriate equipment and setup can be determined.
It’s time to go contactless with the help of NFC mobile payments
The use of contactless payments is poised for further expansion as customers realize how quick, convenient, and safe NFC payments are. Merchants can emphasize the hygienic benefits of not physically interacting with a payment terminal when promoting this capability in stores, alongside the security benefits.
Companies must also continue to evolve with technology advancements to stay relevant and current. Having an out-of-date payment processing system is an inconvenience to customers and a security risk. Providing contactless payment options is one measure that offers many benefits to any organization and its constituents.
This is where Stax comes in.
Stax is compatible with modern payment terminals that can facilitate NFC mobile payments.
In addition, our platform provides a dashboard to help businesses manage financials, payments, invoices, and inventory. Stax gives valuable information about sales data in an all-in-one platform to help you run more efficiently and with better business insights.
There are many payment processing options on the market, and finding a partner who will best meet your needs and provide ongoing support is critical for any business. Stax strives to deliver the best experience with dedicated support, 24/7 customer support, including phone, email, and live chat.
Another essential component of choosing the right payment processing company is affordability. Depending on the size and scale of the company, the cost structure for transaction processing is an important consideration and varies by company. Stax offers transparent pricing through our unique subscription-based, cost-plus model. This approach eliminates variable markups and hidden fees, providing merchants with a clear, predictable monthly expense and direct access to the lower interchange rates.
Get in touch with us today and learn about Stax’s NFC-enabled terminals and how we can help you expand your contactless payment options.
Quick FAQs about NFC mobile payments
Q: What are NFC mobile payments?
NFC (near-field communication) mobile payments are a form of contactless payment method where a mobile wallet or an enabled credit or debit card wirelessly communicates with a payment terminal to send encrypted payment information from the customer to the retailer. NFC-enabled cards have a symbol resembling a sideways WiFi icon, and widely-used mobile wallets include Apple Pay and Google Pay.
Q: How do NFC mobile payments work?
NFC technology connects two NFC-enabled devices in close proximity (usually a few inches) to transmit payment information. A distinctive feature of NFC mobile payments is the two-way encryption, ensuring higher security than swiping or inserting a credit or debit card. Moreover, the transaction requires authorization from the mobile device through face ID, fingerprint, or a passcode. The card information and a randomly generated one-time use code ensure secure data transfer while minimizing the chances of hacking.
Q: How are businesses addressing safety concerns with mobile payments?
Businesses can address safety concerns by educating customers about the security features of NFC mobile payments, such as two-way encryption, biometric or multi-factor authentication, and the use of randomly generated one-time codes. As more consumers understand the security and convenience of NFC payments, adoption rates will continue to grow.
Q: What are the advantages of contactless payments for merchants and customers?
Contactless payments offer several benefits, such as enhanced security, minimal contact for hygienic purposes, and a more convenient and faster payment process. They also allow customers to pay on their terms, and most new credit and debit cards come with tap-to-pay functionality. Additionally, having an updated POS system with contactless payment options demonstrates a business’s commitment to speed, security, and a smooth shopping experience.
Q: How can merchants implement NFC mobile payments?
Merchants need specific equipment to implement NFC mobile payments, including credit card machines with embedded NFC technology, chip readers, card swipers, and monitors. The size of the business, the customer profile, and unique business needs will determine the most suitable POS system and payment terminal. Merchants should consult with their payment processing providers and ensure that they have the necessary equipment and setup in place to handle contactless payments.
