According to eMarketer, 42.8% of customers will use their smartphones for NFC payment by 2025. If your business hasn’t adapted yet to NFC payment processing, it’s high time to think about it.
In this article, we will explain how NFC payments work and give you 14 solid reasons to implement this technology in your business. We will also show you how you can distribute loyalty programs using mobile wallets like Apple Wallet and Google Pay to engage customers and win their loyalty.
To give you a glimpse of the secret, the latter is possible thanks to PassKit, our digital loyalty platform that lets you create digital passes and distribute them on multiple marketing channels, using NFC technology, among others.
Sounds good? You can check out our solution right now, as we give you 45 days to test PassKit for free. All you need to do is create your free account today.
Now, let’s dive deeper into the NFC payments.
What is NFC payment
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NFC payment is a contactless payment method that uses Near Field Communication (NFC) technology. It enables devices to communicate via NFC radio waves when in close proximity.
NFC payment is a method of making purchases using contactless payment devices, such as smartphones and smartwatches. It allows your customers to pay for goods and services without physical contact, which is extremely important in the COVID-19 era.
Stores and restaurants commonly use NFC payment since customers don’t want to carry around cash or cards. It is safe, convenient, fast, and easy to use, making it an ideal payment method for customers on the go.
How NFC payment works
With NFC payment, customers can simply tap their preferred device on a payment terminal to complete a transaction instead of waiting in line, fumbling with their physical wallet, swiping a credit card, or logging into a bank account.
However, NFC payments have some limitations, such as the need to have compatible devices and an NFC-enabled payment terminal.
Why use NFC payment in your business
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NFC payment has become increasingly popular with Millennials and Gen Z, who expect to pay for products or services seamlessly with their phones. It will become more critical as online shopping increases and mobile payments become more common.
NFC payment is also eco-friendly and more efficient than other payment methods, so it’s an excellent option for businesses that care about being green.
One of the most significant benefits is that it can help you reduce costs by removing the need for cashiers and lines. It can also help you increase sales by improving the customer experience and allowing customers to shop faster.
Do you need more facts? Let’s look at some stats to see why NFC payment technology is worth considering.
NFC payment stats in 2022
It’s not a significant discovery that older payment methods have become less popular. Whether the reason is safety or convenience, 57% of consumers say they are more likely to do a transaction with retailers who offer a contactless payment method.
In 2020, there was the largest annual increase in mobile payment adoption, primarily because of the coronavirus pandemic – 900 million people started using mobile payment apps.
According to predictions, the total value of mobile transactions will increase in every region. For instance, the market for mobile wallet transactions in the Far East and China has already reached the size of $4 trillion and will rise by 59% by 2025.
In Europe, the market size is $188 billion and is estimated to rise by 277% by 2025. The mobile payment apps revenue will increase from $550 trillion in 2015 to $1,639.50 trillion by the end of 2022.
No wonder more and more companies decide to adopt NFC payments for their business. They understand the benefits. Let’s explain each of them.
NFC payments pros
NFC payments are more and more popular because of their many advantages. They are:
- Secure – In general, NFC payments ensure more security than credit cards. With a card, the user is identified with a PIN. Mobile payments protect buyers with a unique security code that the system generates for each transaction.
- Versatile – It’s integrated with various payment systems. Customers can use digital wallets, smartwatches, contactless cards, tablets, or even laptops to make payments.
- Convenient – Your customers don’t need to carry credit and debit cards or cash to make payments.
- Fast – It helps complete the transaction within 15 seconds (two times faster than traditional cards).
- Easy to implement – Your payment terminal needs to accept NFC payments, but most credit card terminals and point of sale systems already include this technology. NFC devices are quick and easy to set up.
- Requires less power – The contactless payment industry uses different technologies, such as Bluetooth to communicate with the point of service system. Still, NFC technology uses less energy to complete the transaction.
Surely enough, there’s another side of the coin. NFC payments are not without drawbacks, so let’s briefly discuss them here.
NFC payments cons
What can stop businesses and customers from using NFC payments? Here’s a list of some cons:
1. Limited international availability
Not all mobile wallets will be accepted abroad, even though they use similar technology. It may also happen that some foreign countries require an additional fee for foreign transactions.
2. Cautious customer mindset
Some customers still don’t trust NFC payment technology, even though it is backed by multi-layered security and reliable fraud detection.
3. Technical limitations
Not every smartphone is compliant with NFC technology. Newer devices usually offer the solution, but some customers will not be able to use their smartphones as NFC payment devices.
Although NFC technology still encounters some barriers, one thing is for sure: contactless checkout is the future of retail. Nearly 40% of respondents believe that shopping will be completely cashless in ten years.
14 reasons to start accepting NFC payments today
Here’s a list of arguments why you shouldn’t hesitate about implementing NFC payments:
1. Ease of use
Consumers only need to hold their phones or NFC cards near an NFC-enabled reader to make a payment. A few taps on their smartphone make the device ready to exchange data with the NFC reader, and the transaction only takes a few seconds.
2. Simple setup
If you want to start accepting NFC mobile payments, you won’t have much trouble. First, you need an NFC-enabled payment terminal.
When you choose an appropriate device for your company, you will have to install the NFC-enabled reader and connect it to the internet. The next step is to set up a merchant account to accept NFC payments.
Like with credit or debit cards, your merchant account will directly receive the revenue after accepting NFC mobile payments.
Supporting contactless payments generates lower costs than handling cash, so if you accept NFC payments, you can reduce the overall costs of your business.
What’s more, studies prove that customers spend more money per transaction when using mobile wallets than cash. So if you accept NFC mobile payments, you are likely to see higher sales.
4. Environmental friendliness
Using cash harms the environment. As the American Council of Science and Health reports, we have emitted over 48,000 tonnes of C02 into the atmosphere by mining and transportation of coins.
Polymer banknotes, used in several countries, also release tons of CO2. Paper notes are no better since they have to be replaced more often. This way or another, the cash system is harmful to the planet.
Payment cards are no better, though. Plastic cards are made of PVC, a synthetic plastic that causes plenty of greenhouse gas production and doesn’t biodegrade. It is also harmful to human health.
And what’s even worse? Card payments needlessly spread toxic chemicals into the environment. How?
The receipts printed after each transaction contain poisonous chemicals – BPA and BPS. They have numerous side effects on human health. More than half of all receipts end up in a garbage can, thus creating more waste and contaminating the environment.
NFC mobile payments are free from all these drawbacks since there is no paper, plastic, or metal used, making them more environmentally friendly.
5. Helps you track your business data
When you accept NFC payments, the system collects and analyses payment data. It delivers you a lot of information on the kind and amount of items purchased, purchase location, whether the customer is new or returning, and their buying habits.
This information can influence many important business decisions, such as what type of merchandise you should provide, how to optimize your product and services, or what kind of loyalty program to create.
6. Safer than traditional payments
NFC payments are more secure than traditional card payments. The data on magnetic stripe cards is static, and the card is easy to use for anyone who gets hold of it.
NFC transaction data is encrypted and dynamic – it changes all the time. Mobile wallets like Apple Pay and Google Pay tokenize the bank details. They substitute sensitive data with tokens, i.e., non-sensitive elements, that have no meaning or value for fraudsters. What’s more, with each NFC transaction, the tokens alter.
7. Allows faster payments
Low-value transactions don’t require swiping, signing, or entering the PIN. NFC payments are also faster than chip card transactions. And with impatient customers, each second counts since they usually hate to wait. The shorter the transaction, the happier the customer.
8. Boosts customer loyalty
When accepting NFC mobile payments, the system automatically records customer data. You can take advantage of it by offering your customers loyalty cards to gather points each time they make a purchase and deliver rewards and discounts based on their purchasing behavior to create a personalized customer experience. It is a surefire way to boost customer retention and increase customer loyalty.
You can easily create loyalty cards with PassKit. Your customers can seamlessly add them to their digital wallets like Apple Wallet or Google Pay which are powered by NFC technology.
PassKit connects NFC, Apple Wallet and Google Pay
PassKit is a digital loyalty and rewards solution that allows businesses to create and distribute mobile passes that customers can use to earn rewards, check their point balance, and redeem rewards.
It also helps businesses track customer loyalty data and improve the customer experience. You can use these mobile passes to collect information about your customers to create more tailored rewards programs, engage customers, increase brand loyalty, and boost sales.
Our PassKit platform allows you to create and manage digital passes from a web-based dashboard. You can set up custom branding, including logos and colors, and add barcodes and QR codes for scanning purposes.
Once you create your digital loyalty cards, membership cards, or coupons, you can distribute them via multiple marketing channels, creating a connected customer experience. Thanks to NFC technology, customers can redeem rewards with their smartphones while at your store during checkout.
To see how it works, you can create your account and sign up for a 45-day free trial.
9. Improves marketing strategy
Using near-field communication (NFC) payments provides deep insight into customer behavior. Based on this data, you can find out when customers are likely to make purchases, what they usually buy, and how frequently they make purchases.
It also allows you to find out what products are most popular and whether your marketing efforts are successful. You can creatively use all the data to improve your marketing strategy.
With PassKit, these possibilities expand even further. You can track digital pass redemption through our platform to gain insights into frequency and usage. It will help you gain new ideas and see how you can further develop or improve your loyalty program to reach your business goals.
10. Builds brand recognition
NFC technology can also help you raise your brand recognition. If you become more customer-centric by providing customers the opportunity to pay using mobile devices, you are likely to outsmart the competitors who don’t accept NFC payments. A fast payment method is crucial to the customer’s satisfaction.
11. Convenience for consumers
When customers have an NFC payment device, they can forget about fumbling with cash or digging through their bag to find a wallet.
More and more people use their phones for countless operations during the day. Mobile devices serve not only for communication but also allow people to make notes, take photos, track events in digital calendars, set reminders, do shopping, and entertain themselves.
It causes people to be less likely to forget their phones than their wallets when they leave home.
12. Reduces fraud and chargeback risk
Mobile payment companies use different security measures to protect customer financial data from hackers and fraudsters. First, mobile wallet companies encrypt customer data while storing it on servers.
Second, the user needs to unlock their phone at an NFC payment terminal to make a payment, and many phones use fingerprint technology for this, so it’s hardly possible to use a stolen phone to pay.
After logging into their smartphone, the users need to log into their mobile payment app to authorize the transaction. It is also impossible for an NFC reader to initiate a payment without the user’s knowledge.
And third, mobile wallets like Google Pay and Apple Pay tokenize data to prevent the interception of payment credentials. The merchant doesn’t receive an actual payment account card number, only a freshly-created virtual account number appropriate for single use.
It makes NFC payments more secure than other contactless payment methods like transactions using EMV chip cards.
And what about chargebacks?
Whether you use Apple Pay, Google Pay, or Samsung Pay, banks treat NFC payments the same as any credit or debit card payments. It means that merchants are subject to the same chargeback policies and handle any disputes regardless if the transaction is made through an NFC-enabled device or other contactless payment methods.
13. Easy to integrate with POS and supply chain
For business owners, NFC-enabled devices offer more than the possibility of providing contactless payments at the checkout counter. They also allow you to track your warehouse activities easily.
You don’t need any additional hardware since your employee can use their mobile phone to “tap” bins with NFC tags (stickers with small chips) to enter or read the relevant data. This method will help you accelerate counting activities and reduce long-term costs.
Moreover, unlike RFID tags and barcode labels, the NFC tags are reusable, so you can reprogram them with any data.
14. Increases ROI
Adapting to the NFC payment technology can save your costs and improve ROI. How? Customers value the ease of use and convenience of mobile wallet payments. It makes them more prone to purchasing decisions or buying on impulse. When they spend more money on purchases, customers are more likely to join loyalty programs, encouraging brand loyalty, and increasing revenue.
But that’s not all. Apart from using NFC technology for contactless payments, many companies use it to increase customer acquisition and engagement. How? Let’s take a look at one successful example.
NFC payment success story
In 2012 Orange partnered with Eat restaurant chain to launch an NFC voucher and loyalty service called Quick Tap Treats (QTT). In 144 locations in the UK, visitors could use their Orange NFC-enabled phones to tap especially designed posters and receive free coffee or snack.
After tapping their smartphone on the poster, customers spun a “wheel of fortune” on their phones to randomly select an instantly redeemable treat like porridge, small coffee, fruit, or ham-and-cheese baguette.
Image source: www.pocket-lint.com
For over two months when the offer was active, the number of transactions amounted to 24,614, reaching 410 transactions per day.
And the best part? When collecting their treats, three-fifths of customers bought additional products as well.
NFC payment: Final words
The consumer trend for using mobile phones for contactless payments is only growing. If you don’t want to stay behind, you should consider adopting NFC payments for your business. It will bring you several benefits like improving your marketing strategy, raising your brand recognition, and increasing ROI.
But there is more. NFC technology can also help you win customer loyalty. The payment information you receive with every NFC transaction lets you adjust your offer to your customers’ needs. The technology also enables you to distribute digital loyalty cards and engage customers with your loyalty program.
You can test how it works right now for free. Sign up for the PassKit service and create digital coupons for your customers. Reward them for purchases and encourage them to return for more of your products or services.
PassKit will help you distribute the loyalty program in several ways with email, social media, SMS, and NFC technology. You will leave your competitors behind with low expenses and minimum effort.
NFC payment: FAQ
What are the best options for contactless payments?
Contactless payments are possible thanks to mobile apps like Google Pay, Apple Pay, or Samsung Pay.
Why accept NFC mobile payments?
Thanks to using NFC technology, you will be able to accept payments more quickly and conveniently. It will increase customer satisfaction and be easier for your employees who won’t have to handle cash or cards.
How can I pay using my phone?
To use your mobile phone for payments, follow these steps:
- Add your credit or debit card to your NFC-enabled phone
- At checkout, unlock your phone and log in to your payment app like Apple Pay or Google Pay
- Hold your phone over the contactless symbol to proceed with payment.