how contactless payment works

The growing appeal of contactless payment in France makes NFC a must-know process. In this article, we tell you how this technology works and the reasons for its popularity.

How NFC technology works

NFC technology, from English Near Field Communication, or near field communication (CCP) allows the exchange of information at very short distance between two devices. The distance should be less than 10 cm. One of these devices must be provided with a chip (tag) and the other must be the reader of this chip. The transfer of information works thanks to an electromagnetic field.

NFC has three modes of operation:

• Reader mode, which allows you to use your smartphone as an NFC tag reader and thus obtain information. It is a principle similar to that of the QR code although these two technologies are distinct;
• The peer-to-peer mode which makes it possible to transmit information between two devices, such as smartphones. For this use, NFC is slower than Bluetooth but relevant for light files. Unlike Bluetooth, NFC does not require prior configuration;
• Card emulation mode, which allows information to be transmitted between a smartphone, badge or card and a reader. This is the case, for example, when scanning a bus or library card on the appropriate reader.

Contactless payment, how does it work?

Contactless payment therefore works thanks to the emulation mode. In this situation, it is the bank card, the smartphone or the smartwatch which are equipped with a chip and the payment terminal which is the reader. This is called passive communication, since the reader must increase its electromagnetic field in order to transmit energy to the chip so that it, in turn, transmits information to it.

Here’s how contactless payment works with the NFC technology :

1. The merchant records the amount to be paid on his payment terminal;
2. The buyer approaches the payment terminal with his bank card, his smartphone or any other device allowing him to pay;
3. The operation is carried out without any further manipulation.

Consumer appeal for this payment method

For the year 2020 in France, 4.6 billion transactions by bank card were thus carried out using NFC technology, i.e. a payment on two. Several reasons explain this spectacular craze. First of all, the majority of smartphones are now equipped with an NFC chip. Young people, already familiar with QR codes and Bluetooth, are fond of technologies that improve their daily lives. They also find it practical to replace their wallet with their smartphone, which can now hold their bank card and all the other cards of daily life (transport, library, workplace). There are many advantages, starting with the speed of purchase and the absence of a PIN code.

Contactless payment also avoids having to handle the currency, although this payment method remains the most popular in France. In slow decline, currency is still about 73% of purchases in the euro zone. NFC is gradually attracting consumer preference because contactless payment is considered more hygienic and limits cash flow errors.

For merchants, the advantages are also numerous. The first is that it reduces checkout time and allows sellers to focus more on their relationship with customers. Faster and easier payment helps retain customers and increase their purchases. The time saving is particularly appreciated by merchants receiving many small payments. Decreasing the currency exchange also removes potential errors. In addition, this new method of payment does not generate additional costs.

NFC and security

NFC is sometimes criticized for its security. In 2016, the German hacker group Chaos Computer Club succeeded in hacking bank cards equipped with the NFC chip simply by placing a smartphone nearby. This incident revealed security flaws in NFC technology.

To remedy these problems, NFC security has been reinforced through the encryption and encoding of data during transactions, in compliance with ISO 14443 and FeliCa standards. The banks also limited the amount of contactless payments to €30 and then to €50 in May 2020. They limit the number of consecutive contactless payments and also impose a daily cap. NFC technology, if it is not infallible, thus tends to be more secure as the number of its users increases.

Contactless payment, simple and fast, is attracting a growing number of consumers and is also convincing more and more merchants. Its economic impact is already significant and could, in the future, reshape our consumption habits.