Mobile
Mobile payments

NFC: The next BIG thing? (NFC = Near Field Communication)

Burgess COMMENTARY
For me the key information is towards the end, when reference was made to the system having '... no real benefit compared to inserting it into the terminal.' and then goes on 'NFC will not add a real benefit for traditional card payments – to be blunt, NFC in the current setup only adds wireless functionality to an already established payment workflow ...'

I tend to have the same viewpoint. There is some novelty and a lot of vendors of equipment would love to have the job of replacing the legacy point of sales infrastructure that is already in place. There is little valuadd for society from this, but there is profit for vendors of these new systems.

More important perhaps is the very last observation: '... - but can potentially introduce revolutionized payment workflows and completely new payment systems'. I am not sure what the writer has in mind, but some sort of revolution in the money / banking and product buying process would be helpful. For a very long time the decision to buy or not to buy has been subject to advertising and PR controlled by distributors and manufacturers, a flood of half information about all the good associated with the product, but good from the perspective of the product and those that profit from its sale. It is almost impossible to get objective information about the impact the product has on people and planet through it complete life cycle value chain ... the good and the bad in the supply chain, the good and the bad during its use, and the good and the bad in the post use waste chain. Arguably, the impact on society and the planet for most products are bigger than the profit for the marketers and manufacturers, and the value to the consumer rather modest compared to what is communicated through advertising and PR. A smart system at the point of purchase decision making time would change the way we buy and maybe set in motion a change in behavior that would be good for people, place, planet and profit.

Peter Burgess TrueValueMetrics

Peter Burgess

NFC: The next BIG thing?

nfc-1

In this blog post, we will have a look at the new hype the payment industry seems to have jumped on: NFC! More and more credit and local debit cards are equipped with this technology, just waiting for the acceptance at the Point of Sale. But it doesn’t stop there, as newer phones also incorporate NFC technology. Read on to see what the big fuzz is all about.

What is NFC?

The acronym NFC stands for Near Field Communication. It typically describes a method of data transfer over a radio with a very limited range and is closely related to Radio Frequency Identification (RFID). NFC enables you to communicate with another entity over a very short distance (typically around 5cm) using a limited data rate. The required space for integrating NFC capabilities into an accessory is merely defined by the antenna dimensions, as the chip itself is very small (~0.2cm2). This makes NFC an ideal technology to be added to gadgets, accessories and even payment cards.

Current Payment Applications

NFC technology is currently used in a variety of places, often without you even knowing. Today you encounter NFC enabled credit and debit cards, public transit tickets, student cards and loyalty cards, for example.

By now, newly issued credit and debit cards are more and more already equipped with a NFC chip, enabling new payment workflows for the shopper. MasterCard and Visa are rolling this out on a big scale under their brand names PayPass and payWave, respectively. Additionally, local debit schemes make use of the new technology, unfortunately using country specific proprietary solutions.

PayPass and payWave technology rely on existing credit card accounts and simply add a contactless functionality to the respective credit card. This results in your credit cards having the NFC logo on the front or back. The other card characteristics (magnetic stripe, EMV chip, size) still remain the same and work as expected.

In Germany, GiroGo is the NFC payment solution of choice and is currently deployed with every issued girocard from the German Sparkassen. The system builds upon the established (even though not heavily used) GeldKarte, by simply adding contactless payment capabilities to it. Also, Maestro or V PAY co-branded girocards start to feature the respective PayPass and payWave additions.

Have a look at our previous post about EMV and mobile payments where we already covered some mobile specific topics.

Security Implications and Privacy Concerns

As the information on the card can be read from a distance and without physically holding the card in your hands, the new technology opens up a couple of new attack vectors – either for reading sensitive data from the card or by interfering with actual transactions.

NFC enabled credit cards open up the possibility to get hold of the credit card number and even the cardholder name without your notice. True, the card would still need to come in close proximity with a NFC reader, but there are multiple ways this could be achieved.

However, the system does not allow for arbitrary users to debit or transfer money between two generic accounts. In order to receive funds, an authentic merchant account must be used. And in most cases, the data is already printed on the cards, so a quick photograph does the same trick in most cases.

Conclusion

Costumer’s can benefit from NFC but not in the current setup. All checkout techniques currently employed by the NFC cards could be mapped 1:1 to chip based EMV payments – this is especially true for the CVM waiver. Also owning multiple NFC enabled cards still requires you to pull out one specific card from your wallet and place it on the reader – no real benefit compared to inserting it into the terminal.

NFC will not add a real benefit for traditional card payments – to be blunt, NFC in the current setup only adds wireless functionality to an already established payment workflow- but can potentially introduce revolutionized payment workflows and completely new payment systems.