With the U.S. Europay, MasterCard and Visa (EMV) deadline fast approaching, the payments industry and affiliated sectors are abuzz with talk about the migration underway and the coming liability shift.
Though the EMV transition and its related impacts are significant for all merchants, the shift to become EMV compliant is particularly intricate for retailers. This is due, in part, to myriad payment and security logistical issues associated with accepting new chip and PIN cards, as well as the not so simple requirement of changing frontline protocols to deploy the new protocol at the POS with minimal disruption to staff and patrons.
Meanwhile, the consumer marketplace has exploded with new smart products, such as wearable data collectors and phone apps, which are seeing unprecedented market adoption. Many of these innovations use near field communication (NFC) wireless transfer protocols to port personal data from an NFC-dependent device to a cloud hosted application or NFC-enabled reader. This trend is predicted to change the way consumers will opt to pay for retail products in the near future.
Since payment credentials can be safely stored on a personal device or in a secure cloud account, and NFC technology enables this data to be read by a simple pass across the electromagnetic field of a reader device, NFC-powered payments are already being considered one of the safest alternatives to replace the less secure mag-stripe card. As a result, leading technology companies and payment software makers are launching popular NFC-enabled applications, once seen as too futuristic for the market to embrace.
Furthermore, recent simulated consumer retail studies have found that more than 75 percent of the users tested were positive about NFC technology and preferred its simplicity over other data transfer alternatives. Thus, today's retailers are now facing both the card industry's EMV security mandates, as well as swelling consumer interest in NFC-enabled payment options for the purchase of goods and services.
The good news is these retailers can accomplish both goals at once. The industry and its device makers were thinking ahead when they constructed new lines of EMV compatible terminals, and thanks to advocacy organizations such as the nonprofit NFC Forum formed by Nokia, Philips and Sony in 2004, worldwide NFC technology hosts adhere to universal delivery specifications across the marketplace.
According to Paula Hunter, Executive Director of the NFC Forum, most EMV compliant payment systems already come equipped with NFC capabilities. Therefore, merchants who shift to EMV-compliant machines can already accept payment from NFC-enabled cards, smartphones and wearable devices now hitting the market.
"These features may not have been turned on yet, but if the device can read a chip-embedded credit card, it will also be able to read an NFC chip in a phone," Hunter said. "All major device manufacturers also support NFC on their phones, which wasn't true as recently as one year ago."
NFC technology spawned from radio-frequency identification technology invented in the late 20th century and utilizes a small wireless chip to transmit data through short-range interaction between consumer electronics, mobile devices, personal computers, electrical appliances and NFC-compatible tags. The advantages are many, with the elimination of outdated manual and semi-automated processes heading up the list.
Not only can an NFC-enabled chip provide safe access to private information, it can also share information between smart devices, and it can be used to track health data, compile usage statistics and regulate timed or programmed events – all with a quick screen tap or an air pass within range of a receiving unit.
"There are three primary uses of NFC: as a reader or writer and in peer-to-peer communications allowing devices to talk to each other," Hunter said. "It's the combo of these three modes which makes the payment app so compelling – particularly in the retail and transportation sectors."
Hunter also alluded to the strong marketing potential NFC provides businesses through its ability to collect information. She said retailers such as Walgreen Co. and Best Buy Inc. are taking this a step further by adding coupons and loyalty schemes into the mix. Hunter said that by exercising this capability, "companies can connect with customers far beyond just collecting a transaction, and this allows for a much stickier relationship with them."
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