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.

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