Why Financial Services Providers are Exploring NFC Technology?

Payment

Payment

NFC aims to make banking futuristic and payment systems more convenient

Near Field Communication, abbreviated as NFC, defines as a method of wireless data transfer allowing smartphones, laptops, and other devices to share data when in close proximity. Over the last few years, it has become more prevalent in the payments industry as it can power contactless payments through mobile wallets like Apple Pay, Android Pay, as well as contactless cards. NFC is similar to Bluetooth technology, but it doesn’t require device discovery or manual syncing like Bluetooth.

Thanks to its contactless payment facility, NFC technology is being explored in several banks and card service systems. Since the wake of COVID-19 has enabled a contactless environment, card companies and financial services providers are exploring the capabilities of this technology. Near field communication-based card payments let customers tap and pay on point-of-sale devices, thereby lessening human contact when buying things. 

Recently, it was reported that Google Pay is adding NFC payment support to its app in India, introduced a tokenised card option with Axis Bank, SBI Cards and Kotak Mahindra Bank. With this launch, the company aims to deliver a secure payment experience to its growing base of users. Tokenisation helps to replace sensitive data such as credit and debit card numbers with tokens, eliminating any chance of fraud, according to the company.

During this crisis time, the shift towards the contactless approach is not only driving the adoption of wireless technologies, but also removing legacy challenges that had constrained growth, including high costs of merchant acquisition and friction in payment experiences. As noted by ET, Axis Bank reported that 70 percent of its five lakh PoS devices can process contactless transactions. The bank recently joined hands with Mastercard and Worldline to deliver the functionality of POS machines to smartphones of merchants through NFC technology.

 

Potential of Near Field Communication

Unlike EMV transactions where consumers had to dip and wait, NFC-based payments are typically simple and intuitive. It makes payment transactions easy, as users only need to hold up their phones or their NFC cards to make a payment. It removes the need to stand in those dreadful queues for hours. With NFC, a customer’s money will be protected even when he/she loses their phone. To enable transactions based on this technology using a phone, a user simply needs to have a phone with an NFC chip and then have to download an app like Google Wallet or Apple Pay which connects with their bank account/credit card or debit card or a prepaid account that they have connected to.

Near field communication-powered payments stimulate checkout lines, improving customer satisfaction. Its benefits include ease of implementation, heightened security, convenience and ease of use and more.

The Reserve Bank of India recently issued some guidelines specifically for debit and credit cards, which will reinforce the security and convenience of transactions. Came into effect from October 1, 2020, cardholders will individually set and register preferences for their cards, targeting not just international and online transactions but also contactless card transactions. With this RBI’s new guidelines, customers will be able to switch on and off their debit and credit cards for NFC transactions.