Near-field communication (NFC)—a secure radio technology that allows two devices to wirelessly exchange data when they are within five centimeters of each other—is creating a big buzz in the POS industry. In fact, Juniper Research, a telecommunications research firm, predicts that NFC-enabled payments completed on mobile devices (smartphones and tablets) will total $180 billion annually by 2017. Let’s take a closer look at how NFC is impacting the POS world and what we can expect going forward.
NFC is making it possible for merchants to accept payments without scanning physical credit and debit cards. NFC allows payment credentials to occur when an NFC-enabled smartphone is tapped against a POS terminal or a credit or debit card is waved across an NFC reader. This improves transaction efficiencies.
NFC is spurring consumer adoption of mobile wallets, like Google Wallet and Apple Pay. This is because NFC is the technology through which mobile wallet transactions are executed. NFC makes it feasible for anyone with an appropriately enabled smartphone to leverage a mobile wallet application that stores a credit and/or debit card account, loyalty program credentials, electronic coupons and gift cards, and other payment-related instruments.
NFC is facilitating a wealth of functions at the POS. NFC is not only changing the manner in which restaurants and other merchants accept payments; it is also transforming the POS into a valuable “point of interaction” between merchants and customers. Even if they do not possess a mobile wallet, smartphone owners can, with NFC technology in place, redeem virtual gift cards and coupons, as well as present stored loyalty program credentials at the POS. The convenience of not grappling with paper certificates and cards or even key fobs has the potential to increase sales and boost customer loyalty.
What’s more, NFC-enabled two-way communication between customers’ handsets and POS devices allows coupons, loyalty rewards, and promotional messages to be transmitted to diners’ devices. When smartphones with NFC capability are tapped against or waved across NFC-equipped payment terminals or other devices, consumers’ presence at a restaurant or other merchant location can be determined by Wi-Fi and Bluetooth Low Energy (BLE) signals. Electronic coupons, promotions, discounts, and loyalty rewards can then be “pushed” to diners’ smartphones while they are at that establishment, in turn allowing immediate redemption at the POS and, potentially, a bump in sales and customer engagement.
NFC is upping the payment security ante. The increased incidence of cyber-attacks (data breaches) on foodservice operators and other merchants, coupled with the popular practice of physically “skimming” credit card numbers in order to create fraudulent cards, has heightened concerns about security across the POS landscape. On this front, NFC is impacting the POS industry by adding layers of security that can prevent fraudsters from counterfeiting the traditional magnetic stripe data on plastic cards.
In some NFC-based payment systems, a digital token that replaces the customer’s Primary Account Number (PAN) with a surrogate value is transmitted to the individual’s phone and stored securely. In other payment systems, a different digital token is generated for each transaction and sent to the consumer’s device to authenticate the payment.
Additionally, card brands (e.g., Visa and MasterCard) have introduced incentives centered on the adoption of POS terminals that comply with the Europay/Visa/Mastercard (EMV) standard for secure contact and contactless chip card acceptance. To take advantage of these incentives, merchants must deploy EMV-compliant terminals; these terminals include support for mobile contactless payments based on NFC chip technology.
Just as foodservice operators must periodically change their menus, it is imperative that they regularly explore new technologies that may alter the way they do business. NFC is clearly a game-changer for POS and merits a close watch no matter the type of establishment you own.
