DEFINITION of 'Near Field Communication (NFC)'

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 expanded in 2014 with the introduction of Apple Pay. As of 2015, not all retailers have the equipment to process payments through NFC, so 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.

  1. Digital Wallet

    A digital wallet is a system that securely stores users' payment ...
  2. Card Reader

    A device that can decode the information contained in a credit ...
  3. Contactless Payment

    Contactless payment is a method that allows a cardholder to tap ...
  4. Split Payment

    Split payment is a means by which payment for a single order ...
  5. Mobile Payment

    A mobile payment is money paid for a product or service through ...
  6. Ledger Nano S

    Ledger Nano S is a USB-powered hardware wallet that supports ...
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. Personal Finance

    How Does Apple Pay Work? (AAPL)

    Discover why more businesses and smartphone users are opting to participate in Apple Pay, a new, revolutionary mobile wallet program.
  3. Insights

    How To Protect Your Smartphone From Identity Theft

    A smartphone is an identity thief's dream come true because of all of the information it contains. How can you protect your smartphone data?
  4. Personal Finance

    How Is Cashback Profitable For Credit Card Companies?

    Cashback rewards are not as beneficial to the consumer as they might initially seem.
  5. Tech

    Mobile Payments Could Replace Cash By 2016

    Could paper money be replaced by mobile payments in the near future?
  6. Personal Finance

    Top 3 Mobile Wallets of 2018

    Why carry around a bulky, overstuffed wallet when you can go digital with these mobile apps?
  7. Insights

    How Online Banking Is Overtaking Traditional Banking

    Is traditional banking doomed to be surpassed by online banking?
  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. 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.
  1. Debit card versus credit card

    Can't figure out which card to use when making a purchase decision? Here is everything you need to know about the differences ... Read Answer >>
  2. Is Apple Pay safe and free?

    Learn more about Apple Pay, one of Apple's newest and most metamorphic programs that is changing the way consumers purchase ... Read Answer >>
Trading Center