Covid-19, NFC, and the Future of Contactless Payments

Once touted as the future, contactless payments never achieved mass popularity. Shoppers preferred the familiar swipe, dip, PIN-entry, and touch. The Covid-19 pandemic will probably change that as customers are now more aware of what they touch.

In this guide, I will discuss NFC (near field communication), the technology that powers almost all in-store contactless payments. I will explain how NFC functions and how its payments are secured. I will also examine the benefits of NFC together with challenges to overcome before such payments are anything other than a novelty.

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Contactless Payments

A contactless payment doesn’t require the client to touch a merchant’s point-of-sale equipment. Rather than touching PIN-pads and pens to authorize transactions, a contactless payment permits customers to wave their payment method alongside a payment reader. This is usually known as tap-to-pay, but”tap” isn’t the best description. A tap isn’t required. It is enough to move the payment method near the reading device.

NFC eases many contactless devices. The most common are NFC-enabled credit cards and smartphones, but non-payment devices such as key fobs, watches, fitness trackers, wristbands, and other wearables may also contain NFC chips, commonly called NFC tags.

To check whether a device is enabled, start looking for the contactless payment emblem — four curved lines forming a wireless signal. As a result of Covid-19, we’ll be seeing much more of those symbols.

To check whether a device is enabled, start looking for the contactless payment emblem.


Near field communication is a method for two devices to communicate over radio waves. The term”near field” is used since the signal range is extremely small — no longer than two inches, typically. For NFC payments, both devices are generally a smartphone which stores credit card information along with a contactless-enabled point-of-sale terminal. Just about all new credit cards have embedded NFC tags, also.

Communication between NFC apparatus is either active or passive.

Passive NFC transactions require just 1 apparatus to provide electrical power. The passive device (commonly a plastic credit card) receives its power from the radio waves emitted by the scanning device. For payments, the NFC point-of-sale terminal continuously emits radio waves while waiting for a passive device to enter its area. When that happens, the credit card details are transferred to the reader.

Interestingly, if you were to disassemble a contactless credit card, then you’d get a very thin wire antenna wrapped around the outside of the card. It is this tiny antenna that transmits your credit card details on radio signals into the NFC terminal.

An active NFC transaction happens when every system provides its own electricity. A smartphone is an excellent example of an active device. Apple Pay, Google Pay, and several other payment apps use NFC to execute active transactions. Both devices in an active transaction can transmit and read data over the near area.

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3 NFC Modes

There are 3 ways of NFC communications: reader, peer-to-peer, and card emulation. Each may be used for payments.

  • Reader mode. A sort of passive NFC transaction where the scanning device provides power and reads the info on the NFC tags. For payments, contactless-enabled credit cards are the principal example of passive transactions.
  • Peer-to-peer mode. In peer-to-peer style, two active devices communicate over the radio-wave field. Typically, NFC peer-to-peer style is used for sharing files and images rather than payments, though there’s nothing that prevents payments over peer-to-peer relations. It just has not caught on. Most peer-to-peer payment solutions (e.g., Venmo) rely on cloud-based internet communications to initiate cash transfers, not NFC.
  • Card-emulation mode. Apple Pay, Google Pay, and a lot of the tap-to-pay smartphone apps utilize NFC card-emulation mode where one of those devices emulates a payment card. Really, when Apple Pay is installed and activated, your phone becomes your card. Card-emulating devices contain an NFC antenna (usually wrapped around the battery on the back of the phone) and an embedded NFC tag which may transmit the card’s details. Due to security requirements, credit card details aren’t saved in NFC tags but in protected areas called”secure elements” (see below). Just when the sensitive information has to be transmitted does the NFC tag play a part in card emulation.


Several layers of security protect NFC contactless payments.

  • The near field. The space between two devices in an NFC transaction is no more than two inches. Thus it is impossible for a person to scan your contactless card unless he’s within your near area, which would be two inches or less in the card or device.
  • Cryptography and tokenization. If someone entered your two-inch near area in an effort to scan your contactless card (and you did not notice), the card details remain encrypted and tokenized. He couldn’t use the information because he couldn’t decrypt it.
  • No magnetic stripe data. Information stored on a credit card’s magnetic stripe isn’t secure. Magnetic stripes can be scanned, copied, and used everywhere. Luckily, NFC payments are secured by a standard called EMV (Europay, Mastercard, and Visa, the three firms that made it), which, unlike magnetic stripe technology, constantly requires card information to be encrypted and tokenized.
  • Safe components. In NFC card-emulation manner, credit card details are kept in a safe element, a protected, encrypted, and tamper-proof location. Access to the secure element is extremely restricted and protected by many layers of cryptography. Additionally, trying to break into the secure element will make it to self-destruct. (A microscope and highly specialized equipment are required.)
  • Spending limits and PIN entry. The card manufacturers (e.g., Visa, Mastercard, American Express, Discover) along with acquirers and merchants can implement additional limitations on contactless payments. By way of instance, each card manufacturer mandates spending limitations for contactless payments. When a customer tries to cover an item through contactless payments that exceeds the spending limit, the point-of-sale device will require the client to enter her PIN.

Merchants and their acquirers (i.e., merchant account providers) may also configure their contactless terminals to prompt for a PIN if the contactless card is used for multiple purchases in a short period.

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Benefits and Challenges

The Covid-19 pandemic will probably force brick-and-mortar merchants to decrease crowding, particularly around high-traffic checkout lines, and to limit physical connections, like managing merchandise, opening doors, and pressing PIN-pads and self explanatory computer stations. Contactless payments aid as they need fewer touches. An extra benefit is quicker in-store checkouts.

But before they become universally accepted, contactless NFC payments must be overcome several challenges, including:

  • PIN entry. Again, PIN entry guarantees that the payee is the person who owns the contactless card or device. However, PIN entry defeats the purpose of no-touch payments. Biometrics like facial recognition could become the next PIN. That is unlikely, however, due to the privacy problems with facial recognition and the costs of buying and installing the equipment. Meanwhile, during the pandemic, merchants will probably have to sanitize their PIN-pads after every transaction.
  • Spending limits. Contactless payments were designed for rapid, low-value, low-risk payments. Purchasing a cup of coffee is a fantastic example. However, what if a consumer wishes to buy something more expensive? Current rules don’t allow high-value contactless transactions.
  • Poor standing and fear. NFC has a reputation for being insecure. NFC payments are usually more secure than other procedures, however. (Money and wallets may be stolen; ecommerce websites and databases could be hacked; identities can be stolen and forged) NFC must shake its not-for-commerce standing to go mainstream.
  • Insufficient merchant acceptance. Regardless of the ease and checkout rate, many merchants haven’t updated their point-of-sale terminals and PIN-pads to be NFC-enabled. The method is costly and, pre-pandemic, there was not an urgent need. Until physical shops broadly accept NFC payments, most customers won’t likely pay with their telephones or contactless cards.

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