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What are NFC Mobile Payments & Contactless Payments?

Pavel Panayotov 18 June, 2020
Contactless payments explained

It was so recent when we – the world – immersed in our mobile phones, sidetracking from others more and more. Now, the new social distancing reality made us stay further away from people … and objects. 

This resulted in an increase in online payments and deliveries that do not require exchanging anything, except for the food or package. Contactless payments with cards and mobile phones also gained a huge momentum – a 40% increase of global usage in Q1 2020, as witnessed by Mastercard.

But what is the technology supporting this massive shift in behaviour?


What is a contactless payment?

Contactless payments are a secure method of exchanging money for goods or services by taking a contactless device near a reader at retail locations. Contactless payments are usually made by tapping a debit/credit card, NFC accessory or mobile phone on contactless POS (Point-of-Sale) terminals displaying this symbol: 

contactless payments

Contactless payments are the future of in-store payments, replacing and expanding beyond what magnetic stripe or chip cards offered in terms of convenience. 

In fact, 80% of people around the world claim to be using contactless cards for their cleanliness and for being 5-10 times faster than other in-store payment methods.


How to make contactless payments?

different contactless payments

Contactless payments, as most of us know, happen with the help of debit and credit cards, but not exclusively. In fact, the compact NFC (near-field communication) chip technology makes contactless payments possible via a number of other devices:

  • Mobile phones
  • Smartwatches
  • NFC accessories – key fobs, rings or bracelets

Beyond payments, the tech could be used for securely opening doors, prepaid transport services, identification, wireless communication, loyalty systems and more.

contactless payment devices

Maybe you wonder, what exactly is the technology behind contactless payments?


How does contactless and NFC work behind the scenes?

All contactless payment methods (mobile, card or NFC accessory) have a miniature chip inside, which communicates with a reader via radio waves. This chip is actually an antenna built into the plastic objects. It facilitates the exchange of information between two NFC-equipped devices via the RFID (Radio Frequency Identification) protocol.

Using your debit card or mobile phone to pay contactless involves holding it near the POS terminal. It picks up the signal, which contains payment information, and re-routes it to the VISA, Mastercard or another card network for confirming the transaction. The POS device will then confirm or decline the payment, signalling both parties of the electronic payment outcome. 

Even with the new uplifted limits on PIN-less contactless payments for Europeans, your transaction might get declined and you will need to try again and enter your PIN. 

You could also add a debit or credit card to a mobile device – phone, smartwatch or fitness tracker. They employ the NFC technology inside to work with mobile wallet apps such as Apple Pay.


Tokenization of contactless mobile payments

Storing your e-money in an e-wallet offers top-notch security via tokenization technology. This means that the payment information is scrambled and delivered for decryption by the payment network. Tokenizaton gives you an additional layer of defence. This makes the payments more secure because you need to authenticating with a passcode, fingerprint or Face ID prior to each transaction. This is the reason mobile payments do not require PIN for purchases of any amount.


Advantages and disadvantages of contactless payments

contactless card payments

The world around us quickly switched to contactless payments, but we should all be aware of all the risks and advantages.


THE PROS of contactless payments

Contactless payments became the desired alternative to cash, chip and magnetic stripe cards due to the convenience they delivered:

  • You are saving time by not entering a PIN every time you pay with a contactless card
  • The same speed is available with mobile payments and never entering a PIN
  • Contactless payments help you avoid dirty cash and avoid losing it

Contactless mobile payments are extra secure due to tokenization and the fact that mobile wallets use 2-factor authentication – verifying your login and transactions with a fingerprint, passcode or Face ID.


THE CONS of contactless payments

Debit cards, credit cards and NFC accessories, unfortunately, carry some risks. For example, if your cards get lost or stolen, or someone copies the information on your NFC chip, it’s possible that money may go missing from your account. 

This is actually the reason you sometimes need to confirm a payment with a PIN code – either after every 5th contactless transaction or less if you hit the limit of 150 Euro or its currency equivalent.  With that in mind, be quick to report a missing card to your bank or issuer to avoid any liability and to get your money back. 

To further stay proactive and protective of your money, make sure you regularly check your transaction activities (or statement). Like with losing a card, you should immediately report any unrecognized transactions to your bank and freeze/block your card.

The iCard app, for example, lets you freeze, unfreeze and delete any of your debit cards, virtual cards and NFC wearables. In addition, we send real-time notifications for all transactions, helping you stay on top of your finances and react immediately in case of trouble.


Are you switching to contactless mobile payments?

Choosing iCard digital wallet for your contactless payments is as easy as downloading the app and registering your phone number for an account. Verifying your identity by showing your ID via the app is one of the main reasons people opt for a digital wallet, rather than opening a bank account in-person.


After we verify you are who you say, we will unlock the free Standard account with zero monthly and transparent usage fees for some types of payments.

iCard gives you an immense diversity of features:

  • Free contactless debit card, delivered for free or express
  • 2 free virtual cards – VISA and Mastercard
  • Free and instant transfers between iCard users
  • NFC accessories
  • The exquisite iCard VISA Infinite
  • Encrypted iCard Messenger
  • 7 currencies x 3 IBAN accounts
  • SEPA & SWIFT bank transfers
  • QR code payments
  • Mobile top-up for pre-paid phones around the world

Our app is rated excellent and is already in the hands of over 500,000 people throughout Europe.


Start enjoying contactless payments!
Get iCard today:

79

Pavel Panayotov

As a Communication Manager, Pavel is engaged with creating user journeys and presenting iCard to the world. Contributions include education, activation and engagement strategies, as well as unified cross-channel product and brand awareness campaigns. In his free time, Pavel enjoys keeping up with innovations, marketing trends, friends, family and nature.

More posts by Pavel Panayotov

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c_user
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