Since the first plastic credit card was issued by American Express in 1959, payment tech progress has been growing exponentially. Magnetic stripe payments enjoyed a 30-year reign between the ’70s and ’90s. EMV chip card technology had a good two decades or so, beginning in the mid-’90s. And the winner of the 2010s and beyond is the NFC-powered, contactless sensation that is tap-to-pay.
Contactless payments became a must-have during COVID. Most modern card readers and payment terminals are NFC-equipped. But tap-to-pay is transcending that plastic card of the last 60+ years. NFC technology is in the midst of an evolution. Customers are driving digital advancements, and savvy small business owners should be aware of what’s to come.
History of Tap to Pay
Although contactless payments weren’t widely adopted until the 2010s, the technology actually dates back to 1995. In Seoul, South Korea, the Seoul Bus Transport Association introduced the UPass, a contactless payment card that commuters could tap on as they entered the bus. Almost ten years later, the US tried the technology, and it was four years after that when all EMV cards became NFC-equipped.
Despite the tap technology being available on most major cards, it was the smartphone advancements that really pushed consumers to adopt it. Tapping their phone to a terminal proved far more exciting than tapping the card. Google was the first, in 2011, to enable contactless payments via their mobile app. Apple Pay caught up in 2014; in 2015, the wearables market made everyone aware of the tap’s potential. Once the thought of the tap was there, the behavior followed. In 2015, many merchants switched to NFC-enabled terminals; by 2019, most banks were issuing contactless cards.
How Tap to Pay Works
Tap-to-pay, whether used with a contactless card or a smart device, operates through Near Field Communication (NFC) technology. This short-range wireless communication technology allows data exchange between devices close to each other, typically within a few centimeters.
NFC operates on radio-frequency identification (RFID) principles and electromagnetic induction, enabling communication between devices without needing physical contact or Wi-Fi connectivity.
Here’s how it works:
1.) NFC-enabled devices: The customer’s payment card (credit, debit, or mobile wallet app) and the merchant’s payment terminal must be equipped with NFC technology.
2.) Close proximity: The customer holds their NFC-enabled card or smartphone close to the merchant’s NFC-enabled terminal to make the payment.
3.) Data transmission: The NFC antennas in both devices communicate with each other. The customer’s payment information is securely stored in the NFC chip and transmitted to the merchant’s terminal.
4.) Authentication: The payment terminal validates the transaction by sending the payment details to the payment network (such as the card issuer—e.g. Visa, Mastercard, and the customer’s bank) for authorization.
5.) Secure transaction: The payment network verifies the transaction details, ensuring sufficient funds and confirming the transaction’s authenticity. A unique, one-time code is generated for that specific transaction if approved.
6.) Completion: The transaction is completed, and the customer receives a payment confirmation. The entire process is fast and secure and does not require physical contact between the card or smartphone and the payment terminal.
Benefits of Using Tap to Pay
During the pandemic, the number one benefit of contactless technology was the simple fact that it is contactless. No contact, no germs. But the benefits made known during that time were more aligned with the original reason for its development.
It’s faster
Contactless technology speeds up the payment process. Rather than “dipping” the card into the machine, merchants can quickly pass the reader close to the customer. The customer taps the card, and the transaction is complete. NFC devices facilitate the fastest and most convenient data exchange available today.
It’s secure
NFC transactions are secure due to the short distance over which they occur. Moreover, NFC devices can be secured with encryption and authentication protocols that ensure the confidentiality and integrity of the transmitted data, such as the cardholder’s personal information and card number.
It’s universally compatible
Unlike the chip card and magnetic stripe, NFC technology is standardized. This ensures compatibility between different devices and applications. Standardization enables seamless integration of NFC into more devices, including smartphones, tablets, payment cards, and other smart gadgets. It can power a payment future beyond our current plastic cards.
It’s versatile
One way to verify the longevity of a technology is to look at its usability outside of the obvious application. Businesses are using contactless loyalty cards and even loyalty apps that allow customers to store those loyalty cards digitally. Interactive marketing lets customers tap NFC-enabled promotional material to access offers, discounts, and product information. Beyond retailers and accepting payments, NFC is used for public transport, access control systems, smart advertising, data exchange between devices, and interactive gaming. NFC even enables smart packaging to provide customers with product and usage information at the point of sale.
No comments:
Post a Comment