Near field communication’s edge over other digital payment technologies

By Indra Giri on January 20, 2017

Near field communication (NFC) is a short range contactless radio frequency technology which allow easy, secure and fast communication between the two electronic devices. It is compatible with millions of devices which are already NFC enabled (NFC World, 2016). In this article major features and benefits of the Near field communication technology  as a digital payment system, has been discussed.

Comparison of Near field communication with other similar technology

  Near Field Communication RFID Bluetooth IrDA
Set up time Less than 0.1 ms Less than 0.1 ms 0.5 seconds 6 seconds
Usability Easy, fast, human centric Easy , item centric Easy , data centric Data centric,
Use Pay, share, get access, easy set up Tracking of items Exchange and control of data Data exchange network
Range Up to 10 cm up to 3cm Up to 5cm Up to 30 cm
Consumer experience Simply connect, tap and pay Helps in getting information easy Confirmation  required

Table 1 Comparison of NFC with other existing technologies in different parameters. (Source: Oracle, 2016)

Reducing the time spent on each transaction using Near field communication technology

As shown in our previous article that the total number of truncation in India through plastic cards are very low as compared to cash transactions. One of the main reasons behind such scenario is because the payment by swiping debit or credit card is time consuming. This process take significantly higher time as compared to tap and pay process.

Using the near field communication can reduce the average length of queue in India
Average queue length in Indian retail store (Source: Tata Consultancy Service, 2014)

However on the other hand the NFC based payment system is less time consuming. Since consumers pay  by tapping on the merchant’s NFC based point of sale (POS) machines. According to the recent report by Visa on an average a British consumer spends around 7 minutes per week  on queue and more than 80% of the customer leave the shop due to long queue. However with the introduction of contactless card both time and queue has reduced significantly.

The billing timing in India is one of the highest
Billing efficiency in the Indian retail store (average time taken for each billing) (Source:Tata Consultancy Service, 2014)

Easy to use for both customers and merchants

One of the most important advantages of NFC technology in payments is, it is easy to use. The chip can be installed in mobile phone or other accessories such as bracelet, watch etc. Customers do not need to carry multiple cards with them as multiple accounts can be integrated to work with one NFC chip. Similarly for  merchants, it is easy to set up and install is simple (Forbes, 2014; Infosec Institute, 2016).

Reduction in manpower cost for merchants

Use of the NFC technology can help the merchant to reduce manpower cost. Currently for most of the retailers in India, manpower cost can be 3- 5% of the total sales. A lot of the manpower is used in billing of the products. Since NFC technology is easy and less time consuming merchants can reduce their manpower cost.

Use of near field communication can reduce the manpower cost of the merchants
Manpower cost in retail store in India (as a percentage of total sales) (Source: Tata Consultancy Service, 2014)

Highly secure with advanced technology

Another advantage of using NFC technology over other payment mode is safety. Since consumers do not have to physically handover the card to the merchant, the probability of transferring important card details to the merchant is very less. The technology also prevents the merchant from storing the debit or credit card information since a unique code is generated for every transaction.

Security concerns Measures taken in NFC technology
  • Limited range of NFC does not allow the criminals for intercepting signals.
  • Data encryption.
Interception attacks
  •  Use of active passive pairing.
Data manipulation and corruption
  • “Listen” for attacks on data corruption and prevent them from running.
  • Password protected smart phones
  • Data encryption
  • Secure channels

Source: (Tata Consultancy Service, 2014; Infosec Institute, 2016; NFCTechnology, 2016; Oracle, 2016)

Similarly the magnetic strip readers used for the plastic cards are subject to skimming and counterfeit. Technologies which can prevent such threats are compatible with the NFC technology. However such advanced technology cannot be used in case of magnetic strips cards.

Further, NFC technologies also use secure communication channel. Use of data encryption for sending and receiving information makes it safer. Similarly, NFC enabled phone can be secured through using the password, which is not possible in case of physical card. This makes the technology more secure in case of lost and theft.

Improvement in consumer satisfaction

As the technology is time saving and easy to use, it helps to add value by consumer satisfaction. Similarly the NFC enabled smart phones can be used to integrate discount, coupons, loyalty cads and gift cards on a single platform.