Nowadays, customers expect to have plenty of payment options during the checkout process. With NFC technology that's highly encrypted and is one of the best and most secure digital payment methods, businesses and customers can accept NFC payments from contactless cards, wearable devices, and mobile phones.
In this article, you'll witness how businesses can trust payment acceptance with NFC as they're one of the safest digital payment solutions. You will also learn, how businesses can manage NFC payment risk, and what security measures businesses can implement to make NFC payments.
Let’s spill the beans!
Is making NFC payments secure for businesses?
Is your business looking to accept NFC payments but not sure about its security? Then, have a look below.
NFC payments using NFC technology is one of the most secure payment technologies that comprises three primary security layers, and they are:
User-initiation:
When customers use NFC-enabled payment solutions, they must go through at least one identification check during the payment process. It implies that if you launch any specific app within a few seconds, you need to authenticate yourself. Moreover, for NFC-enabled debit or credit cards, typing a PIN code is a must.
Proximity/short-range communication protection
NFC is a short-range wireless technology that usually requires a 4cm or less distance to initiate a connection and make payments. As the NFC-enabled device is in extremely close proximity to the payment terminal, unusual or suspicious activity can be easily detected.
Secure element verification
An EMV-enabled chip securely verifies transactions. The user's card or device verifies the payment via EMV chip. At this validation point, a unique digital signature is assigned to every transaction people make, and that offers them high-level security while making a payment.
However, NFC technology is not 100% safe and hackers can get confidential data or information of customers and merchants by accessing the NFC terminal. Also, they can hack the smart devices of users by assigning malware code. However, to do all this, scammers should be “near” their target area.
Security measures, such as dynamic authentication code, tokenization, or EMV®, are also there to guarantee that transactions are safe. The security channels ensure that the NFC payments are encrypted, as only authorized payment devices can decode the information.
What if NFC payments in existing systems are not there?
If your existing point of sales terminals or card readers are not NFC-enabled, then you should upgrade your existing software and hardware to accept NFC transactions. Several other merchant account providers, like PayPal, Apple Pay, or Google Pay offer or sell NFC-enabled POS terminals and card readers.
Last but not least, ask for a merchant service agreement to find out what the processing fees will be for making NFC payments.
These processing fees are usually similar to other card-present transactions (a transaction where cardholder shows their physically present credit or debit card to your business at the POS terminal), though there exist a few differences that depend on your provider or your agreement.
How your business can manage NFC payment risk?
The risk of chargebacks and fraud can be a pitfall for your business resulting in huge revenue loss or it can lead to closing your merchant account.
However, NFC payments are a savior for your business as they are not that riskier compared to transaction types.
For most of the retailers, chargebacks that are less than 1% are linked with card-present transactions. This can result in increasing your chargeback-to-transaction ratio (CTR) when your business accepts NFC payments.
However, incorporating some effective security measures or Implementing robust risk management strategies can help your business minimize the potential risk associated with accepting NFC payments, especially when your business processes card-present and card-not-present transactions.
Security measures that NFC payments have
NFC payments incorporate several security measures to protect against fraud and unauthorized access, and your business should know the following measures:
Encryption methods
The transmission of data between the payment terminal and the NFC device, which can be a card or smartphone, is encrypted. This encryption further converts your sensitive information into a secure code.
This secured code helps prevent hackers or a number of unauthorized parties from capturing users' sensitive details, including debit-credit card numbers and payment amounts.
Customer verification requests
In case of large amounts of transactions, the payment system may inquire for extra security that requires additional customer verification, like giving signatures on receipts or entering a PIN.
Moreover, such security measures offer multilayered protection against different fraud types and unauthorized access.
Device authentication
Often, smartphones, including several payment devices, require authentication to make NFC payments. The authentication technique includes facial recognition, fingerprint, or typing passcode that ensures that the true or righteous owner of the device is making the transaction.
Dynamic authentication codes
Every time you make a transaction, a unique authentication code is generated. Even if a particular transaction detail is intercepted or illicit, it can't be reused if you want to make another transaction with the same details. It will help in minimizing the risk of illegal repeated transactions.
Short-range communication
NFC payments use short-range communication technology that adds an extra layer of security. In short-range communication, the payment device should be placed close to within a few centimeters of the payment terminal for customers to make transactions. This results in reducing the possibility of unauthorized access.
Secure element
Many smartphones that use NFC technology have a secure component, which is a dedicated chip that securely stores confidential payment information.
This EMV-enabled chip is isolated or detached from the main operating system of the user's phone, which adds another security layer if there's an attack by hackers or scammers.
Transaction limits
A few banks, financial institutions, fintech organizations, and other businesses set restrictions on NFC payments to minimize the risk of illicit transactions.
When the transaction amount surpasses a certain limit, then there's a requirement for traditional authentication methods, like a PIN entry.
Real-time fraud monitoring
Often, in real-time, payment processors, banks, financial institutions, fintechs, and other businesses monitor transactions for unusual patterns, suspicious behavior, or activities.
In case they come across identifying unauthorized access, they can immediately take action by contacting that particular customer or by declining the transaction.
Tokenization
While making transactions, rather than giving your actual card number, NFC payments generate a unique one-time-use token that is encrypted. You can't reuse this encrypted token for making other transactions, which makes sure your confidential data is secured or protected.
Conclusion
It's evident for many years now that today customers wish for a hassle-free shopping experience from the start till the checkout process. Hence, with NFC-enabled equipment, customers can make faster transactions.
In this process, businesses make efforts to couple that transaction with advanced security measures, including tokenization, short-range communication, device authentication or multifactor authentication, and more that offer their customers an appealing payment method.
Businesses like yours can also offer near-field communication payment solutions to their customers along with working on loyalty programs or other rewarding services that leave not a single doubt in their minds to make NFC payments.
