The payment industry is in the midst of a major transition. Driven by technological advancements and the power of the Internet, merchants and consumers alike are benefitting from faster and more secure transactions as well as a variety of new payment methods.
The mobile wallet, where consumers pay just by using their cell phone, is one of these methods that’s in the process of going mainstream. NFC technology and systems like Apple Pay, which power the mobile wallet, have the potential to change consumer buying behavior and the transaction process itself.
As this technology evolves, you probably have a number of questions about NFC and what this means for your business. Following is the first of a three-part FAQ designed to answer many of your questions.
What is NFC?
NFC is short for “Near Field Communications.” Essentially it allows customers to use their cell phone to make a payment simply by tapping it on an NFC-enabled payment terminal. The customer – using systems like Apple Pay, Google Wallet or Softcard – no longer needs to find cash or their credit/debit card. They just tap their phone on the reader and the payment is processed.
How does it work?
NFC payment systems like Apple Pay begin with a microchip that’s built into the cell phone. The customer links the payment system on their phone to their bank account or credit card. When it comes time to make a purchase, the customer first must accesses their mobile wallet. Then the chip in the phone and the reader at the store “talk” to each other, registering the transaction. That’s it.
How important will NFC be in the years ahead?
Industry experts predict massive growth in the mobile payment industry. While the U.S. market for mobile payment is quite small now at around $5 billion, Business Intelligence predicts the market will grow to $189 billion by 2018. They also expect that world-wide shipments of NFC-capable terminals will increase from around 6 million in 2014 to 18 million by 2018.
In our next post, we’ll discuss the benefits of NFC and the security of these transactions.