“Tap to pay”, contactless credit cards, contactless payments, or mobile payments- however you refer to them, they are here to stay. Maybe you’re familiar with NFC technology, and you’ve most certainly heard of Apple Pay, Samsung Pay, and Google Pay. Maybe, you have yet to upgrade to EMV compliant terminals equipped to accept NFC contactless payments. The fact of the matter is, we are beginning to see significant growth in the U.S of NFC powered contactless payments. If you’re still using the old mag stripe reader payment terminals, it’s time to join the “contactless” party.
Consumer behavior in countries other than the U.S. with regard to payments at the point-of-sale has been a very different thing. In many other markets across the globe, contactless payments are not just popular, they are the predominant way to pay. For example, Australia adopted “tap to pay” technology rather quickly, with 83% of in-person transactions using contactless technology in 2019. The UK and Poland have also been among the first adopters of contactless technology.
Here we’re going to discuss how NFC works, why it’s more secure, and why it’s an important convenience feature to offer your customers.
The US is finally seeing a surge in contactless payment use and it is only going to continue to grow.
America was already seeing a slow rise in contactless payment use as more consumers discover the convenience of mobile wallets. In addition, there has been a gradual move towards a more cashless society. But now, we are dealing with consumers’ concerns over their health and safety. And because of this, we’re seeing a noticeable shift in consumer behavior toward greater use of contactless technology recently.
It’s estimated that the contactless payments market will reach $2.23 trillion globally by the year 2025. Over that period, it is likely that America will be one of the key drivers.
Several things contribute to the growth of contactless payments in America:
- Major card brands such as Visa, MasterCard, and American Express continue to issue contactless credit cards to their cardholders. By the end of 2019, Visa issued an estimated 100 million + Visa-branded contactless cards in the U.S.
- Nationwide EMV compliance law requires merchants to upgrade to EMV compliant terminals (which include NFC capabilities). Now, more merchants are equipped with NFC terminals. It’s easier than ever to use your mobile wallet or contactless credit card at more locations.
- The launch of large-scale contactless payment adoption by U.S. city mass transit systems.
- Consumer adoption and expectation. It’s estimated that by 2020 there will be 2.87 billion smartphone users worldwide. When polled, 66% of consumers said they believe “smartphones will replace credit and debit cards as the main method of payment” within the next five years.
- Consumer’s desire to remain healthy and safe. Covid-19 could be a catalyst in driving greater use of contactless payments. The recent pandemic has caused people to more concerned over contact with people and surfaces. Contactless payment methods allow consumers to keep their hands to themselves and their wallets put away. In fact, 51% of Americans report to making payments with some form of contactless payment method according to a 2020 Mastercard poll.
Understanding NFC capabilities as it applies to contactless payments.
NFC stands for Near Field Communication. NFC builds on Radio Frequency Identification technology, or RFID, by sending information over radio waves. The use of radiofrequency allows compatible devices to communicate over a short-range distance and without an internet connection. In order for NFC to work, two NFC devices must get within 2 inches or less of one another. When you hold a contactless card near an NFC payment terminal the chip in the card will activate the chip on the terminal. Once the two devices connect, they are able to exchange encrypted information wirelessly.
NFC can be used with a credit card equipped with an NFC enabled chip, or with the eWallets of major smartphone brands. Three of the most popular eWallets are ApplePay, SamsungPay, and GooglePay. Apple launched ApplePay on Sept.14, 2014. Samsung quickly followed in line launching Samsung Pay on Sept 16, 2015. Google Pay is a merging of Android Pay and the Google wallet, which was completed in 2018. Mobile wallets allow people to use credit and debit cards that are not NFC chip-enabled to make contactless payment transactions.
More secure than EMV alone – NFC offers layers of security.
First, it’s important to note that mobile wallets only enable NFC once the owner has opened the app, selected the payment method of choice, and placed it near the NFC payment reader. In addition, they are only capable of connecting with one NFC enabled device at a time. In this way, there is no chance a person’s phone close by could connect with your wallet or accidentally get charged for your purchase.
Biometric authentication within the phone brings added security to the transaction. Once a credit card is entered, all card data is encrypted within the mobile wallet. Passwords and biometric security measures such as fingerprint and facial recognition are required to open the wallet. This serves to provide another layer of authentication to the transaction. Consumers are more comfortable with the security of biometrics than they are handing their card to the cashier.
In addition to the phone’s biometric security, each payment transaction employs unique codes and tokenization. Tokenization is “the process of replacing sensitive data with unique identification symbols that retain all the essential information about the data without compromising its security”. When a customer makes a purchase with their mobile wallet a unique code is generated and transferred. This unique code is referred to as a token.
In an NFC transaction, the card information is both encrypted and dynamic. This means that it is constantly changing. The actual card number and data are never transferred and the same code is never used twice.
Merchant accounts already meet strict security standards for payment transactions. Security measures such as fraud filters and EMV security standards help protect all electronic payment transactions. The security from biometrics is another layer supporting the security measures already in place for transactions through the merchant account.
Why NFC contactless payments are great!
Contactless cards saturation in the U.S. is increasing.
NFC isn’t just for mobile wallets. Consumers still like to use their cards and more and more card-issuing banks are sending out contactless-enabled cards. According to research done by 451 research, 73% of Millennials would like to make purchases with a contactless card.
Accepting contactless payments enhances cardholder experience by accepting their preferred payment methods while still delivering an efficient checkout.
Contactless payments bring added convenience to the consumer.
NFC allows consumers to use their phones to make a payment. It also allows for the use of NFC equipped wearables such as smartwatches to complete payment transactions. If there’s one thing people never leave home without, it’s their phone. NFC makes it convenient for consumers to make a purchase even when they weren’t planning on it.
In addition to added convenience, contactless payments bring peace of mind. With contactless credit cards, the card never leaves the customer’s hand. And, with the use of mobile payments the card never even leaves the wallet. This greatly reduces the incidence of lost or forgotten cards. And, since you never hand your card over to an employee, the card number and CVV codes can’t be stolen or skimmed.
Contactless transactions are faster than fast.
NFC transactions complete quite a bit quicker than chip-and-dip transactions. In fact, it only takes just under 1/10 of a second for two NFC devices to establish a connection.
Customers hate to wait. Key customer pain points often involve convenience, speed, and personalization. A recent study on shopping cart abandonment found that 51.3% of consumers said they left without purchasing because lines were too long.
Address customer pain points by accepting contactless credit cards and mobile wallets. This will help you show you care about their desire for fast, frictionless purchasing.
But guess what? Speed is great for merchants too. Increased checkout speed reduces long lines, increases revenues, and lends to customer satisfaction.
But it’s not only about speed and convenience. Integration with existing loyalty programs leads to greater marketing opportunities. Opportunities to target customers using location-based marketing. NFC can allow merchants to increase customer loyalty by offering personalized mobile coupons when customers are in or near the store.
There’s never been a better time to upgrade to NFC contactless payment terminals.
Travelers from other countries where tap-to-pay use is common, expect to be able to pay the same way they are used to. Cities around the U.S., such as San Diego, New York, and Chigaco, now support contactless payments and mobile wallets in their mass transit systems. On top of that, Millennials and the upcoming Gen Z generations grow up with technology as one of the main components in their everyday lives. Consumers are becoming more comfortable with technology. And, as they do, they’re beginning to expect to be able to use it whenever and wherever it is convenient for them.
If you have upgraded to new EMV compliant terminals, they are already equipped with NFC and you should be able to accept all mobile wallets. If you haven’t already done so, now is the time to upgrade your payment acceptance to include NFC contactless payment methods.
Bankcard Brokers can make the transition to accepting NFC a breeze. We are dedicated to remaining knowledgeable on the most up-to-date solutions in the industry. Our ETA-Certified Payment Professionals are uniquely qualified to advise you on the most customized solution for your business needs.
Give us a call today and see what it feels like to “Experience the Bankcard Brokers Difference!”