The holiday season is upon us, and this year, consumers will be shopping with newer methods of payment. One form that is making a comeback is NFC, or “Near-Field-Communication,” a form of wireless communications that exchanges information between nearby devices. Next year at this time, shoppers using credit cards or bank-issued cards will have EMV chip technology – provided the issuer has met the October 2015 deadline. What does all this mean to merchants? Let’s start by exploring how NFC mobile payments relate to the soon-to-be-implemented EMV technology. There are a lot of similarities, and also some notable differences.
- Consumers will have more payment options in the long run.
For consumers, a change in technology can mean more available payment choices. With the introduction of EMV-enabled credit cards as well as NFC mobile devices, merchants across the U.S. are wise to consider upgrading their point-of-sale systems. That’s because NFC and EMV transactions require separate processes; these are different from the standard process used to swipe cards with magnetic strips. It will be up to merchants to decide whether to accommodate these new types of payments. However, once October 2015 rolls around, merchants need to accept EMV chip cards in order to avoid liability in a fraudulent transaction.
- EMV and NFC payments provide more secure transactions.
With major security breaches affecting millions, fraud has become a huge concern on a global scale. Both NFC mobile payment and EMV technology parties are working toward a safer, more secure purchasing landscape, on and off the screen. However, unlike individually encrypted transactions enabled by EMV chip cards, NFC mobile payments work with a technology similar to Bluetooth. Essentially, an NFC transaction establishes a radio frequency between two electronic devices in close proximity (hence the term near field). The short proximity makes it difficult for a hacker to snag financial information. Both technologies provide a more secure consumer-merchant experience, especially when compared to the antiquated magnetic strip technology.
- Both forms of payment are gaining momentum in the U.S.
While NFC mobile payments have been available to Android users for years, the technology gained much notoriety with the release of Apple’s iPhone 6 and iPhone 6 Plus. This year, NFC-enabled devices are just shy of $20 billion in sales, a tiny dent in what’s projected to hit $189 billion in sales by 2018. Similarly, EMV technology is getting into the hands of consumers and the pace is accelerating. Already, about 30 percent of global transactions are through EMV chip cards. Though the U.S. is one of the last adopters of the technology, banks and card companies are working together to distribute EMV chip cards in hopes of meeting the Liability Shift deadline.
While many questions regarding EMV and NFC remain unanswered, what we do know is that shoppers are gravitating to more convenient and secure options. For merchants, fraud prevention is key. Right now, less than 10 percent of U.S. retailers are equipped to accept NFC payments. Similarly, nearly 40 percent of merchants also won’t have EMV technology by the end of 2015. While the changes won’t happen overnight, there is a huge opportunity for merchants and consumers to move toward a better, more secure business environment.