NFC payments are contactless payments that use near-field communication (NFC) technology to exchange data between readers and payment devices like Apple Pay and Google Pay e-wallets in smartphones and smartwatches, or tap-to-pay credit and debit cards. NFC devices must be close together (typically less than 2 inches apart) to complete these contactless payments.
NFC payments are widely used because they are contactless, encrypted, and highly secure and can help speed up the checkout process. To accept these payment types, you need a specialized card reader. However, due to contactless payment popularity and increased adoption rates because of the COVID-19 pandemic, most merchant accounts offer NFC readers.
How NFC Payments Work
When payment and reader devices are close together and activated, the NFC chips exchange encrypted data to complete a payment. The process creates a lightning-fast checkout flow that’s both convenient and one of the most secure payment methods. Because of this, NFC-driven payments, such as Apple Pay and Google Pay, are fast becoming a preferred consumer payment method.The wireless or “contactless” connection between the two devices uses radio waves similar to radio-frequency identification (RFID) labels used in store, warehouse, and other wireless tracking applications. NFC chips use a specific RFID radio frequency (13.56MHz) that only works when the chips are very close together.
For added security, e-wallets only communicate with NFC readers when the e-wallet user unlocks the app on their device, selects the payment card to be used, and completes the payment action.
Another security plus is that NFC payment readers connect to only one NFC payment device at a time. This makes it so there’s absolutely no danger that a nearby customer accidentally pays for another’s purchase. The technology simply won’t allow that to happen.
In addition to the security benefits covered above, shoppers can also store multiple credit and debit cards on their mobile devices. This reduces shoppers’ need to carry cards in wallets and purses. Because of this convenience, consumer adoption of NFC payments is on the rise, and shops that accept versatile NFC payments can cater to this growing crowd readily.
How to Accept NFC Payments
You need an NFC-enabled reader to accept NFC payments, but that’s just one part of the equation. Your credit card processing plan has to accept digital e-wallet payments as well. Most (though not all) merchant account providers do this. Typically, processing fees for NFC payments are the same as regular card-present payments, however exact pricing will vary depending on your specific merchant account and plan.
Learn more about credit card fees and how they work
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Benefits of NFC Payments
- Faster checkout process: According to Mastercard, contactless payments are up to 10 times faster than other in-person payment options.
- Better, more convenient customer experience: Allow customers to choose the payment method they are most comfortable with. Some 40% of consumers prefer digital wallet payments, while 37% prefer contactless card payments.
- Increased security: Using NFC technology is more secure than swiped card payments. In fact, NFC technology has contributed to a decline in in-person credit card fraud.
NFC Payment Outlook for Small Businesses
NFC payments are not exactly a new technology, but businesses and customers alike have been rather slow to adopt this payment type. For example, only 51% of iPhone users have enabled Apple Pay (the most popular NFC payment type) on their devices.
Shoppers Hesitate to Use NFC Payments
According to an eMarketer survey, security concerns are the biggest reason shoppers do not use NFC payments. However, as we mentioned earlier, NFC payments are actually one of the most secure payment methods available. After security concerns, not knowing how to use mobile wallet payments or where they are accepted are the main reasons shoppers do not use NFC payments.
Retailers Express Concerns Around NFC Payments
According to a study conducted by the National Retail Federation and Forrester, the cost of implementing and accepting NFC payments is a top concern for 75% of retailers, while 65% are concerned about cybersecurity risks and 63% are concerned about increased fraud.
COVID-19 Accelerated NFC and Contactless Payment Adoption Rates
However, much hesitation around NFC payments from both shoppers and business owners lifted at the start of the pandemic. In the first quarter of 2020, MasterCard witnessed a 40% increase in contactless payments.
In the same Forrester survey, the National Retail Federation found that as of 2020, 58% of retailers accept contactless payments, which is a huge 40% increase from 2019. Of retailers surveyed in August 2020, 19% said that no-touch payments accounted for more than half of all in-store transactions.
NFC Payments Are Here to Stay
According to the National Retail Federation, 94% of retailers expect to see an increase in contactless payment usage.
It also found that of consumers who used contactless phone or card payments for the first time in May 2020, 67% were satisfied with the experience. And, 57% report they will continue using the payment method after the pandemic. MasterCard also found that 74% of global consumers plan to continue using contactless payments once the pandemic is over.
An NFC payments-enabled reader is what you need to accept NFC payments in your store or business. Startups and small to mid-sized retailers can add this capability easily by purchasing low-cost NFC payment readers from top-rated small business payment processors.