How Nfc Technology Works And Some Safety Tips

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The financial systems evolved from standing in long bank queues to one-tap-and-go communication. The advent of technologies like NFC (Near Field Communication) redefined the entire payment ecosystem. 

Reports show that NFC transactions increased during the Covid-19 pandemic as more merchants and buyers embraced contactless payment options. It allowed everyone to continue purchases while maintaining social distancing protocols.

Now it’s a new normal as more people prefer quick no-touch payment options when they shop in offline stores.

How Does Contactless NFC Payment System Work?

NFC is a technology that connects two NFC-compatible devices in proximity. NFC payments work in two ways – using NFC-enabled credit/debit cards and mobile wallet apps. 

Users can initiate payment by tapping or waving their handheld device or card to the nearby payment terminal. Simply put, it’s a source for contactless payments. 

So whether you’re using Apple Pay, Google Pay, Samsung Pay, or a tap-to-pay card, you can instantly make contactless payments at payment terminals.

The technology uses an NFC-enabled reader to communicate the payment information. This process creates an electromagnetic induction link between a user’s device and the payment terminal. Hence, users can transfer funds through a smartphone or a contactless EMV chip card at the POS (Point of sale).

Difference Between NFC-enabled Mobile and Tap-to-pay Card Payments

The contactless transaction system via mobiles uses ISO/IEC 14443 standard. With NFC-enabled mobile, you can tap or wave a wallet app over the NFC-compatible in-store card reader to complete your payment. Hence, people can make instant payments without carrying a stack of physical cards and cash. 

On the contrary, you can use debit and credit cards embedded with NFC technology to transfer money on the POS terminal. However, the payment process is the same through these NFC-powered physical cards. That said, tap or hover to pay at any store.

The POS card reader will read your payment details through both transaction modes.

Are Contactless Payment Gateways Safe?

Contactless payment technology is reliable and secure transaction system that stores card details in token form. So no third party can access your financial data as you transact using NFC-powered devices.

Here’re key security parameters of NFC payments that ensure data safety for customers and merchants alike.

Data Encryption

Unlike traditional banking cards, NFC-enabled cards and devices work on encrypted technology. It uses a tokenization system that replaces actual card details with randomly generated numbers. Your phone transmits temporary numbers to the POS terminal for every contactless payment transaction. 

Hence, your sensitive data is safe from online malicious actors.

Invulnerable Validation Process

The payment processes once the mobile or tap-to-pay card validates the purchase. It requires a secure element chip or one-time code to confirm each transaction at the merchant’s payment terminal. So, the NFC-enabled device and the card reader don’t exchange your valuable data. 

Biometric Authentication

Almost every mobile allows users to add biometric login credentials, such as fingerprint or facial recognition technology. This security feature adds an extra layer of protection for contactless payments via e-wallets. If you lose your phone, you need a verified biometric password to access your banking data.  

Transaction Alerts

You can also activate transaction alerts to receive instant messages for every transaction made through your card or e-wallet. During an unauthorized transaction alert, you can immediately take the necessary steps.

Industries Using NFC-Enabled Payment Terminals

Several business sectors are now allowing funds transfer through NFC-powered devices and cards. Check out the key market players.

  • Retail Stores

Offline stores are one of the early adopters of contactless payment modes. Today, you can make fast and no-touch transactions in clothing and department stores. The POS system accepts payments via both mobile and NFC-enabled physical cards.

  • Restaurants

Many restaurants and cafes allow check payments via NFC devices and tap-to-pay cards. It also facilitates managers to eliminate cash-handling issues. 

  • Transportation

Public transportation like trains and metros integrated NFC-enabled card readers to provide seamless travel. For instance, travelers buy tickets via touchless payment gateways at every train station in the Bronx. 

  • Casino Operators

Online casinos that take credit cards and mobile wallets also accept funds via NFC-enabled e-wallet apps. It provides players with a safe gambling experience while transacting online.

  • Movie Theaters

From booking movie tickets to buying a popcorn tub at the counter, you can instantly make payments via NFC cards and devices. 

  • Gas Stations

Many gas stations also allow contactless payments using tap-to-pay cards or NFC e-wallets after refilling the fuel in the vehicle.

Future Scope of Contactless Payments

As per Juniper Research, global contactless mobile payments can increase by 221%, while NFC-enabled cards can record growth of 119% by 2027. However, the USA is currently the world’s leading contactless mobile payment market. 

Soon, more public transportation and healthcare facilities will allow contactless payment methods. There’s also a possibility of touchless payments leveraging facial recognition sensors in the times ahead. This technology will enable customers to pay effortlessly by facing a camera at the POS terminal. 

Undoubtedly, the future is bright for contactless payment systems. As the NFC technology evolves, transactions will become more convenient and secure.


1. Is contactless payment NFC or RFID?

Near Field Communication is a subset of Radio Frequency Identification (RFID). Contactless cards or payment apps use NFC technology to process funds within the range of approximately ten cm. However, RFID technology allows data transmission for up to 100 m.

2. What are the best contactless mobile payment apps?

Some reliable contactless e-wallet apps are Apple Pay, Google Pay, PayPal, Cash App, and Samsung Pay.

3. How much time it takes for a contactless transaction to complete?

Usually, your payment process will complete within 5 to 15 seconds via a smart card or NFC-enabled phone. 

Bottom Line

Contactless payments are here to stay. Now you can transfer money anytime and anywhere without worrying about forgetting your card or wallet at home. Moreover, it’s an outstanding technology for independent merchants and small businesses to receive payments within a few seconds.

With the rise of NFC transactions, this digital payment mode will become more accessible across various industries. 

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