Contactless (NFC) payments and card readers

Contactless payment is one of the newest methods of payment in the UK, and its popularity has soared since its introduction to UK markets back in 2007.

Nowadays, contactless payments account for over a third of card payments and this number is growing by the year as card payments themselves overtake cash in the digital age. Here’s everything you need to know about NFC.

What are contactless (NFC) payments and how do they work?

Contactless payment is the general term used for NFC payment – that’s Near-Field Communication. Put simply, it’s a digital frequency that allows two devices to communicate information between one another when they within a certain proximity.

In this case, the two devices are your debit card, credit card or smartphone, and a POS card reader or wired payment terminal. When you tap or place your payment device near the NFC reader on a card reader system, it reads your account number and expiry date and can authorise payment for goods or services, up to the value of £30 in the UK.

What are the advantages of contactless payments for retailers?

Offering quick, easy payment is beneficial to retailers as it’s another way of making transactions easy for customers.

Psychologically, not needing to enter a PIN makes people more likely to decide to spend money, so NFC is a good way of increasing volume.

Add that to the fact that it’s much quicker, and you can start to see how contactless can add up to increased profitability.

There’s also the digital aspect of using POS systems – transactions are recorded and you can get a better hold of your finances. And with less need to carry cash, you have a greater level of security and convenience.

What are the advantages of contactless payments for customers?

For customers, it’s mostly about speed. Contactless payments are far quicker and more convenient and this means less hassle and shorter queues.

But there are two other considerations here. Firstly, you can store all your cards in an app and use NFC payment through your smartphone, leaving you more space in your pocket or handbag where your wallet or purse once was.

Secondly, there is no pressure to remember a series of PINs, so that means an end to customer embarrassment – at least in this one instance.

Is contactless payment safe?

This is an enduring question that comes into focus every time the maximum spend limit is raised for NFC payment, but the answer hasn’t changed throughout: yes, contactless payments are safe. There have been a number of myths circulated about contactless payment, but there isn’t much truth in any of them. Here are the three most common.

• Someone can steal my money while my card is in my pocket.
  This isn’t at all likely to happen. There are two reasons for this. Firstly, NFC is only designed to work when the communicating devices are within 4 inches of each other. Nobody can steal your money from across the room, or even from a neighbouring seat. Secondly, the only device that can take money from your card is a card reader, and you can’t just pick these up in a newsagent. You have to have an account with the POS provider, and these companies perform checks and monitor usage. If you were to somehow be robbed by a portable NFC card reader, it could be very easily traced.

• My card could be cloned.
  NFC payments work on a transaction-by-transaction basis and are encrypted. It would take advanced technology to circumvent this and is very unlikely to happen.

• The card reader could take payment from two of my cards at once.
  This isn’t possible; card readers can only process one transaction at a time. And remember, if you do fall victim to fraud, your money is protected by the bank. All you need to do is contact them and go through their in-house processes to get you your money back and try to trace the origin of the fraud. But there is little cause for concern; NFC fraud represents less than 2% of the overall fraud cases in the UK.

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Top image: Jacob Lund | Shutterstock