NFC – Everything A Small Business Needs to Know
The payments industry is an intricate, twisted mass of old and new competitors, each vying for market share like lions on a carcass. That analogy isn’t far off, as several nationwide chains, including CVS and Rite-Aid are refusing to accept all NFC payments just to stick it to Apple. On the retailer side, a conglomerate led by Wal-Mart has released their own digital wallet, CurrentC, which was hacked and compromised almost immediately.
But what about EMV? It’s still on the horizon. In October, 2015, businesses without EMV compliant hardware will be held liable for fraudulent, card-present transactions. Card issuers will release new cards, also known as chip-and-pin cards. These cards have been active in Europe for about a decade, and the continent has seen a drastic reduction in compromised card information since then.
Confusing and irrelevant for most consumers, the payments war continues. NFC and EMV are not competing technologies – they are complementary in the payments field. A chip-and-pin card can be used in a digital wallet with no hassles. Businesses are lucky; merchant services providers have terminals that are able to accept contactless forms of payment as well as chip-and-pin.
What is NFC?
Near field communication (NFC) is a proximity-based method of communicating via radio waves between enabled devices. It’s most known for the payment industry’s recent takeoff, which includes front runner Google Wallet, Softcard, and latecomer ApplePay. However, it is also useful for transmitting large amounts of information between two devices, and can even read smart tags, which are similar to QR codes.
NFC & Security
One of the biggest obstacles to widespread adoption of NFC-based payments is the state of security surrounding the technology. This is a complicated discussion, but needless to say, NFC is secure and is here to stay.
Here are some highlights: NFC technology is only effective in a range of about 10 cm, and its zone of interaction is not spherical, it’s very specific and in only one direction (if you’ve used contactless payment methods before, you know what this is like). This is the strongest security feature of NFC technology.
While using a contactless payment method, the interaction between your phone and the terminal is a one-way transaction. The terminal simply subtracts a certain amount from the smartphone’s digital wallet, and everyone moves on.
It’s important to remember that NFC has been around for years. The technology is no longer new, instead it’s being tested and adopted for the most efficient commercial use. It’s gone through rigorous testing and isn’t always perfect, but it would never have gotten this far if it was incapable of 1) protecting payment card information and 2) providing the cheapest and most efficient platform to pay with a mobile device.
It’s even more important to remember that no technology is 100% safe. Use common sense. Don’t pay with your phone if you don’t trust the retailer. Nothing is silly when it comes to protecting your information.
Landscape for Merchants
Based on information collected during the post-Thanksgiving shopping bonanza, only a small percentage of eligible Apple Pay users are actually using Apple Pay. CVS, Rite-Aid, and others are national. They can afford to invest in new hardware that will benefit them in the long term, while not risking as much today.
Small businesses – Main Street or otherwise – do not have that luxury. Since adoption of NFC tech is not yet widespread, businesses will have a hard time justifying the expense of a terminal.
As a merchant services provider, our goal is to provide the most efficient and useful payment processing services at the lowest cost. Because of the turbulence in the industry and lackluster adoption of the new standard, our recommendation is to pass on NFC enabled terminals for now.
NFC is the direction in which the industry is headed, so don’t throw it out the window. You willneed to be able to accept contactless payments, and you will need to protect the security of your customers’ information, so keep an eye on our blog or give us a call to learn what we can do for you!