Updated on February 28, 2020
9 min read

Over the years we have seen some tremendous technological advancements in the field of finance and payments. The intervention of technology has totally changed the way we make payments today. With internet banking, mobile banking, and mobile wallet payments, we no longer are dependent on cash.


With time, we are witnessing new technologies being used to make the payment experience better than ever. And one of these technologies is NFC.

NFC payments which are also known as contactless payments have gained immense popularity throughout the world. In 2015, the global NFC market size was valued at $ 4.80 billion and it’s about to increase 10 times by the year 2024 with an estimated valuation of $50 billion.


So, why are NFC payments accelerating at such a rate? In this article, we will discuss what NFC payments are, how it works, what are the major names that provide NFC payments, and its pros and cons.

So, without further ado, let’s begin.

What is NFC?

NFC stands for Near Field Communication. It’s a technology that enables users to securely transmit and receive information through their phones over a short-range (usually 4 cm). NFC is an upgrade of the existing RFID technology which combines both the reader and the smartcard interface into a single device.

But how does it actually work in contactless payments? Let’s have a look at it.

How does NFC Payments Work?

When both reader and payment devices are close together and activated, then there is an exchange of encrypted data from the NFC chips which complete the payment.

This process makes the checkout flow lightning-fast, thus making NFC payments as one of the most secure and convenient payment methods. This is the reason why NFC-powered payments such as Android Pay and Apple Pay are becoming a preferred payment option for consumers.

The contactless connection between the two devices is established with the help of radio waves which are similar to RFID labels that are used in warehouse, store, and other wireless tracking applications. NFC chips use a specific RFID frequency of 13.56MHz that works only when both the chips are placed very close to each other.

Many digital eWallet payment apps use NFC for added security as digital wallets only communicate with NFC readers when the user unlocks the app on the device and selects the payment card to be used for payment.

Another security feature of NFC is that the NFC readers connect with only one NFC payment device at a time. This eliminates all the possibilities of a nearby customer accidentally paying for someone else’s purchase.

NFC also allows its users to store multiple debit and credit cards on their mobile devices. With this, the users no longer need to carry cards in their wallets.

Leading NFC payment applications

Google Pay

Google Pay is an NFC payment app for Android-powered smartphones. With this application, the user can tap and pay and make in-app payments in stores and vending machines. Moreover, you can also send money to your friends and family.

This application also allows users to use most of the debit and credit cards of major brands such as Discover Cards, American Express, and many more. Moreover, you can also use cards issued by major banks like Citi, Bank of America, and Wells Fargo.

Apple Pay

Apple Pay was introduced in 2014. It is available for iPhone 6 and later versions along with iPad (iPad mini 3 & iPad Air 2 and later) and the Apple Watch which allows customers to make ‘contactless’ payments at stores.

The Touch ID function increases the security of this application. Apple Pay also comes with tokenization, which means that the iPhone transmits a token to the merchant instead of card details like the card number.

So, even if the attacker succeeds in stealing the token from the merchant’s payment system, he won’t be able to get the card information.

LifeLock Wallet

LifeLock Wallet is one of the best NFC payment apps that enable a user to store credit, debit, insurance number, ID, and loyalty cards. Moreover, it also has an identity theft protection service built in the app.

It scans more than a million transactions per second to detect and notify the user of any potential threats to their identity. It also provides an identity restoration specialist for any user that has become the victim of identity theft.

MasterCard PayPass

PayPass is the payment feature that is included in the banking cards of MasterCard. With this card, users can tap and pay to make purchases at merchants that have the PayPass terminal. All the payments have unique electronic encryption that reduces the risk of theft or loss of card and also protects data.

Moreover, the automatic check eliminates all the possibilities of payment duplication caused due to accidental touch.

Visa payWave

Visa payWave is a secure payment technology that reads and receives credit card information. With this technology, the user can make quick and secure purchases at all the stores that accept the Visa payWave card.

This Contactless payment system has an integrated computer chip that sends the payment information to a secure point-of-sale reader. The contactless payment made by Visa payWave is as safe as the payments made by that of magnetic tapes. Moreover, the control over the payment device reduces the fraud risk to a great extent.

Major benefits of NFC payments

More secure

Using mobile wallets is a more secure option than carrying physical cards. It’s because these digital ewallet apps like Apple pay tokenize all your bank details into something that can’t be accessed or used by the fraudsters. So, even if your mobile phone gets stolen, all your credit cards and other valuable details stay protected.

In addition, these tokens change for every NFC transaction, thus making it nearly impossible to extract it.

NFC mobile payment apps like Apple Pay also come with fingerprint technology which adds an additional layer of security to the payments and saves the user from any fraud.


Compared to payments made by cash, chip, or PIN cards, the NFC payment systems are a lot faster. It’s because the user just has to tap the NFC card or place the NFC powered smartphone near the reader.

It’s also convenient for the merchant as they don’t have to wait for the customers to enter their PIN or search for the cash. With NFC, payments can be made within seconds.


One of the greatest advantages of NFC payments is convenience. NFC technology has made it very easy for users to make payments via their tablets and smartphones. The overall process of payment is also easy to use and understand. With this, the user can make transactions with a simple touch or few taps on the smartphone.


NFC is very versatile in nature as it covers a large range of various industries and services. NFC allows user to make payments at various places, out of which few of them are:

  • Fuel pumps
  • Parking garages
  • Movie tickets
  • Tollbooth
  • Merchant payments
  • Rewards
  • Banks cards
  • Transit tickets

Conserve Battery

There are many technologies apart from NFC that allow devices to communicate with the point-of-service (POS) system. Bluetooth technology is an example that provides a similar benefit.

However, the main advantage of NFC is that it requires less power to complete the transaction. This makes NFC a better choice for merchants who are worried about their wearable and smartphone getting drained off due to numerous transactions.

Enhanced checkout experience

Long lines at a store have an adverse effect on the customers as they might leave without purchasing anything. If a shopper finds long queues every time he visits the stores, then he might label the store as crowded and go somewhere else.

NFC technology can boost the speed of the checkout process for all customers. This makes the queues shorter and enhances the experience for both store owners and customers.

Drawbacks of NFC payments

Too expensive

NFC technology has a plethora of benefits; however, these benefits come with a cost. And this cost is too high for some companies to afford. Companies like Starbucks have successfully integrated the NFC technology in their system; however, for smaller companies, the NFC integration can cause difficulty in maintaining their turnover and increasing their profits. It’s because the cost of installing software & hardware along with hiring technicians is very high.


NFC payment technology is surely more secure when we compare it with the credit card technology; however, it’s not completely free from risks. We have often seen that rapid innovation and evolution in technology has come up with both positive and negative consequences.

Read More: A foolproof platform for digital transactions

Mobile phone hacking has become a common phenomenon and hackers are coming up with new ways to dupe customers by gaining access to their financial data. This makes the entire system prone to frauds and scams which discourages the customers and merchants from using this technology for payments.

However, the customers and merchants can take a sigh of relief as there are many security measures that make payments safe from online frauds. Furthermore, these measures will only become better in the near future.


Lack of availability is probably one of the biggest drawbacks of NFC payment technology. It’s true that Apple Pay and Google Pay are gaining immense popularity. But it’s also true that there’s a vast majority of retailers who aren’t that excited about it. Due to this, the NFC technology is not available in many of the stores which makes it difficult for an NFC payment user.


With its immense benefits and advanced features, NFC technology is set to become more popular in the coming years. You shouldn’t be surprised if accepting or making payments via contactless methods becomes the new norm.

NFC is a fast, convenient, and secure way of making payments that can be adopted by users as well as small & mid-sized retailers. It’s true that there are few disadvantages of NFC technology especially when it comes to security; however, with time this technology will improve thus making it more secure for payments.

This was all about NFC payments, if you liked reading this article and are looking for more insightful pieces then keep reading this space.


Nikunj Gundaniya

Product manager of Digipay.guru, one of the leading digital wallet solution. He is a visionary leader whose flamboyant management style has given profitable results for the company. He believes in the mantra of giving 100% to his work.

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