Credit Card Processing and the NFC Chip
If you haven’t already heard, NFC (near field communications) is being touted as the NBT (next big thing) in credit card processing. Some industry observers are boldly predicting that NFC chip-equipped mobile phones will replace wallets and credit cards. Others are saying, “Not so fast!”
NFC refers to a set of short-range wireless technologies that allow smartphones and similar devices to establish radio communication when they come into close range (a couple inches) with each other. The applications for NFC-enabled devices are many and varied. They can be used in social networking situations (sharing contacts and files), as electronic identity documents and keycards, and in contactless and mobile payment systems like those currently used in credit cards and electronic smartcards.
In the latter situation, shoppers with an NFC-equipped smartphone simply wave it in front of an NFC receiver at checkout instead of swiping their credit card through a terminal. The NFC receiver reads the signal and charges the transaction total to the shopper’s designated credit card. The receipt is automatically stored on the smartphone.
Options for consumers interested in NFC are somewhat limited presently, but that’s expected to change quickly. Google Wallet was launched in late 2011 and works on only one 4G phone on one network. Isis — a joint venture of wireless service providers Verizon, AT&T and T-Mobile USA — is expected to heat up the competition by introducing more options later this year.
While NFC is being hyped for its convenience, receipt storage and coupon/special offer redemption capabilities, not everyone is convinced that it’s ready for prime time. One major concern is security. While the communication range of NFC is limited to a couple inches, that alone does not ensure safe communications. In fact, NFC does not protect against eavesdropping and can be vulnerable to data modifications. All of these issues would be of major concern in a credit card processing application where secure transmission of data is paramount.
Like all new technology, NFC will require a honeymoon period with the American buying public as it learns the ins and outs of the system and its applications in their lives. If it passes that test, chances are NFC will become part of the lexicon of credit card processing.