Near Field Communication and Mobile Payments

In 2016, mobile payments are expected to triple in the US, reaching $27 billion.  
 
So, exactly how do mobile payments work and what is Near Field Communication (NFC)?  In simplified terms, NFC is a method of transferring wireless data that detects and then enables technology in close proximity to communicate without the need for an internet connection.  Evolved from radio frequency identification, an NFC chip operates as one part of a wireless link.  Once activated by another chip, small amounts of data between the two devices can be transferred when held within a few centimeters from each other.  These chips run on very low amounts of power and are much more efficient than other types of wireless communication.  
 
There are two ways for NFC to work:
 
Two-way Communication – This involves two devices that can both read and write to each other.  An example of this would be touching two Android devices together in order to transfer data (contacts, links, and photographs).  
 
One-way Communication – A powered device, such as a phone, credit card reader, or commuter card terminal reads and writes to an NFC chip.  By tapping your phone on a terminal, the NFC-powered terminal will subtract money from the balance written to the card.  
 
Credit cards with NFC chips are already being used for contactless payments.  NFC within your smartphone can digitize your entire wallet.  This technology is already available in Android and Windows phones, Apple’s iPhone 6, iPhone 6 Plus, and Apple Watch.  
 
You may be wondering if NFC payments are secure.  The most important step in the mobile payment transaction is the secure element, which holds all the authorization power.  The secure element within your smartphone is tamper-proof and protected by a unique digital signature.  The architecture of the secure element is designed to be hardened against attacks on the phone.  
 
Apple Pay is already accepted in over one million US locations and Android Pay allows a consumer to make contactless payments at over 700,000 retailers worldwide.  Whichever device you have, it is likely that retailers support contactless payments via your phone’s NFC chip.  
 
Looking forward to the future, it is possible that NFC chips could be used to replace every credit card in your wallet.  Keeping this in mind, you may want to discuss NFC implementation with your service provider when scheduling your EMV upgrades.