What is 'Near Field Communication (NFC)'

Near-field communication is a wireless technology that allows users to make payments by placing a compatible device like a smartphone or payment card within a few centimeters of another compatible device like a terminal, tablet or another smartphone. Near-field communication transmits data through electromagnetic radio fields and is the technology behind payment services like Google Wallet and Apple Pay. Both devices must contain NFC chips for an NFC transaction to take place.

BREAKING DOWN 'Near Field Communication (NFC)'

Near-field communication can simplify and speed up the payment process. Instead of having to carry around both a wallet and a smartphone, for example, NFC makes it possible for consumers to only carry a smartphone that can be used as a virtual wallet. Payment occurs by waving one device or another or tapping two devices together. It can also facilitate more secure payment transactions while eliminating the need for retailers to check identification by requiring biometric information such as a fingerprint. Such requirements also provide another level of safety against credit card theft.

NFC technology started becoming widely available to consumers in 2011 with the introduction of Google Wallet, and became more widespread in 2014 with the introduction of Apple Pay. Because not all retailers have the equipment to process payments through NFC, consumers usually still need to carry cash or payment cards. In fact, users may need to continue to carry a backup payment method even after the technology becomes universally available because a device with a drained battery can’t be used to make a payment.

While NFC is perhaps most well-known as the technology that lets consumers pay retailers and each other with their cell phones, it’s also used in subway cards and credit cards that can be waved over card readers, as well as in speakers, household appliances and other electronic devices that users can monitor and control through their smartphones.

History of Near Field Communication

Near-field communication technology has its roots in radio-frequency technology, or RFID, that has been used for decades by retailers to tag and track products within stores. Near-field communication technology began to gain steam in 2004, when Nokia, Phillips and Sony banded together to form the NFC forum, a nonprofit organization with the goal of promoting and spreading the technology. Nokia released the first NFC-enabled phone in 2007, and more than 100 near-field communication pilot projects were launched by the year 2010. In 2017, New York’s Metropolitan Transit Authority announced that the New York subway would be phasing in a system that enables riders to pay their subway fares with NFC technology.

RELATED TERMS
  1. Mobile Wallet

    A mobile wallet is a virtual wallet that stores payment card ...
  2. Contactless Payment

    Contactless payment is a method that allows a cardholder to tap ...
  3. Card Reader

    A credit card reader reads the the information on a credit or ...
  4. Split Payment

    A split payment is a means by which payment for a single order ...
  5. Social Payment

    Social payment is the use of social media to transfer money to ...
  6. Returned Payment Fee

    A returned payment fee is a charge a credit card company may ...
Related Articles
  1. Insights

    New Technology: Pay Without Your Wallet

    Google Wallet and smartphone app Card Case are making your purse or pocket that much lighter.
  2. Investing

    Why China Is Locking Out Apple Pay

    China launches a public transport digital payment service for Android, shutting out Apple Pay.
  3. Tech

    Is the Payment Processing Industry Evolving? (PYPL, TGT)

    Learn about the many changes in commerce and payment systems that are happening in the rapidly evolving payment processing industry.
  4. Tech

    Fintech: Square Maintains Hold on Mobile Payments (SQ)

    With the announcement of faster chip card readers, Square's bread and butter remains in mobile payments.
  5. Tech

    3 Ways to Avoid Electronic Pickpocketing

    Learn what electronic pickpocketing is, and find out which steps you can take to avoid getting pickpocketed through commercial and do-it-yourself methods.
  6. Personal Finance

    How Is Cashback Profitable For Credit Card Companies?

    Cashback rewards are not as beneficial to the consumer as they might initially seem.
  7. Investing

    Microsoft Enters NFC Mobile Payments With New Microsoft Wallet (MSFT)

    Microsoft has relaunched its mobile wallet which allows Windows 10 Mobile Users Tap-To-Pay feature.
  8. Tech

    The Credit Card Chip: What Travelers Must Know

    Credit cards in the U.S are just getting ENV technology, which embeds a smart chip in your credit card. Here's how to avoid problems when traveling.
  9. Insights

    Samsung Pay Rollout Challenges Apple Pay (AAPL)

    Riding high on the success of processing $1 billion in South Korea, Samsung Pay is preparing to challenge Apple Pay globally.
  10. Tech

    Venmo vs. Square Cash vs. Google Wallet: How They Compare (SQ, GOOGL)

    Mobile P2P payment services facilitate financial transactions, and Venmo, Square Cash and Google Wallet are three major players. Here's how they compare.
RELATED FAQS
  1. How is the minimum payment on a credit card calculated?

    Even when minimum payments are low, consumers should still aim to pay off credit card balances every month. Read Answer >>
Trading Center