A shopper using their smartphone to mobile pay at a payment processor

NFC Payments: How They Work & How to Accept Them with SumUp

Accepting credit card payments isn’t just a choice anymore. In a society that is slowly going cashless, it’s an essential part of your business strategy. But sometimes it can feel hard to keep up with all the new credit card technologies, from EMV cards to virtual terminals.

NFC contactless payments are still growing in popularity at an exponential rate, but many business owners still don’t know how NFC transactions work. That’s why we’ve developed this complete guide to answer all your questions, from “How does NFC work?” to “Is NFC safe?” and more.

What is NFC Technology: A Brief History

NFC stands for “near field communication.” NFC has its roots in another technology, called radio frequency identification (RFID), which was patented by Charles Walton in 1983. Using RFID tags, Walton was able to “label” specific radio waves, making it easy to send and track data through a short-distance wireless communication.

From there, Walton and other developers continued to refine the RFID frequency process, and in 2003, NFC technology was approved as an ISO standard. By 2011, the first NFC mobile apps were being introduced on smartphones. According to a recent study by Juniper Research, contactless payments accounted for $1 trillion in transactions in 2018, and payments from NFC apps and wearable devices will surpass $15 billion in value.

Benefits of Accepting NFC Payments

According to a late 2019 study by the Diary of Consumer Payment Choice (part of the Federal Reserve), 87% of payments were made in-person in stores across America. At the same time, Pew Research reported that in 2018, nearly 46% of consumers didn’t consider it important to have cash on-hand and 43% say they don’t use cash for their weekly purchases at all.

According to the same article, while cash is still used for a majority of transactions, it is used predominantly for smaller purchases under $10 and continues to decline. In comparison, credit and debit cards were used for transactions of at least $46 on average. Experian found an even larger gap between cash and credit card purchases, reporting that while the average transaction for cash purchases is just $22, the average transaction using a credit card was $112.

So, if you’re wondering why you should accept credit card payments via NFC technology, the answer is twofold: First off, more customers are leaving home without cash, which means that accepting their digital wallet or NFC chip card might make the difference between a sale and no sale. Second, research has repeatedly shown that customers spend more with their credit cards than they do with cash.

How to Accept NFC Payments with SumUp

In order to allow your customers to pay wirelessly, you’ll need to have an NFC-capable POS system like SumUp. Accepting contactless payments with the SumUp Plus Card Reader is easy—all your customer has to do is bring their card, mobile device or wearable accessory close to your payment terminal. The NFC tags from the customer’s payment method will activate a transaction automatically. Then, follow the same steps as you do for accepting credit card payments to complete the transaction.

The Difference Between EMV Cards and NFC Payments

EMV stands for Europay, Mastercard and Visa, but the term is commonly used to refer to any card that contains an EMV technology chip. Chip cards have become nearly universal, and are offered by every major carrier because they’re significantly more secure than traditional magnetic stripe cards.

How do chips work? The chip creates a unique transaction code for each purchase while inserted into the merchant’s card reader, making it nearly impossible to counterfeit the card from that transaction. Meanwhile, NFC payments work without being inserted, via wireless communication with an NFC terminal or wireless card reader.

Common NFC Mobile Apps

While new RFID applications are being created all the time, here are a few of the most popular choices for payments via smartphones or other smart devices:

Google Pay
Apple Pay
Samsung Pay
Visa PayWave
Mastercard PayPass

Close up image of a blue credit card with an EMV chip.

NFC Security: How Card Issuers Help Protect Your Money

All payments made with near field communication are encrypted and are considered more secure than swipe-able cards. Most mobile applications use a method called tokenization to protect emulated card transactions, and these technologies are constantly updating, making it even more difficult for fraudsters to keep up.

Mobile apps for payments are extra protected by your phone’s security measures and unique emulation codes and technologies that prevent “cloning” by thieves. On the merchant side, SumUp also protects NFC transactions via our fully encrypted, PCI-compliant credit card processing systems.

The Bottom Line

As NFC technology continues to grow in popularity, accepting credit card payments via contactless methods has become a key component in many businesses’ in-person sales strategy. NFC is a safe, secure way to pay that is being adopted by more users, and by upgrading your systems to take these payments, you’ll show that your business is evolving with the times.

Loved this article? Check out more of our expert guides on accepting credit cards at your business:

Lindsey McGee