What is NFC and how does it work?

What are NFC mobile payments?

NFC mobile payments refer to contactless payments made from a mobile device or NFC-enabled payment card. NFC stands for Near-Field Communication and is a subset of Radio Frequency Identification (RFID). NFC is the process that can allow two devices — like a mobile phone and a payments reader — to share data in proximity.

So, what is NFC used for? This technology has many potential applications, including enabling mobile payments for shoppers. Instead of handing over cash or even swiping a card, NFC allows individuals to simply tap their card or mobile device to a merchant's payment terminal.

Are NFC mobile payments different to contactless payments?

An NFC mobile payment is a type of contactless payment. Contactless payments are generally considered to be touch-free payments that can be made by transferring data between two nearby devices. Many, but not all, contactless payment methods use NFC technology. Some contactless payments that don't use NFC are QR code payments.

How do NFC payments work?

NFC payments may work by transmitting data between two objects within a few inches apart, like a customer's smartwatch and a merchant's payments reader. Contactless payment cards typically have NFC chips that allow for this transfer of data. NFC capabilities can also be built into many smart devices — so if a customer has a digital wallet set up on their smartphone, they may be able to use it to make an NFC payment.

NFC payment data is usually encrypted with alphanumeric codes, making this one of the more secure payment methods.

Is there a contactless payment limit?

There is a spending limit for contactless card purchases in the UK. In October 2021, the HM Treasury and the Financial Conduct Authority increased the contactless payment limit from £45 to £100 per card purchase.³

It should be noted that this limit only applies to contactless credit card purchases — not to contactless payments by mobile device and mobile wallet.

How to pay using NFC technology?

There are generally two main ways to pay via NFC connection:

• Credit or debit cards. If a shopper has an NFC-enabled credit or debit card, they can likely tap or hover it over a business's NFC-enabled card reader. Look for the contactless payments symbol at the merchant's payment terminal to determine if this option is available.
• Mobile devices. Many mobile devices, including smartphones, tablets, and smartwatches, can support NFC payments. People can check their device settings to see if they have this capability. Once NFC payments are enabled, shoppers can use a mobile wallet or payment app to make a purchase with their device.

Potential pros and cons of NFC payments

There are potential advantages and disadvantages to using NFC payments. Here’s what to know:

Potential pros of NFC payments

Some of the benefits of NFC payments may include:

• Speed. Shoppers can make NFC payments in seconds by simply tapping or hovering their card or device.
• Convenience. People can pay right from the mobile device already in their hand or pocket. No need to fumble with cash, swipe a card, or even enter a PIN.
• Security. NFC payments are encrypted through a process called tokenization, making it difficult for hackers to access a buyer's information. They're also considered more secure than magnetic-stripe cards,⁴ which can be stolen and stripped.

Potential cons of NFC payments

The potential downsides of NFC payments may include:

• Spending limits. The UK has set a spending limit of £100 for contactless card payments.
• Concerns about fraud. Although NFC payments are considered more secure than many traditional payment methods as stated above, shoppers may have concerns about data privacy and fraud since NFC transactions are entirely digital.

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