NFC or Near Field Communication is a wireless technology that allows devices to communicate with each other over short distances. NFC payments are contactless payments that use NFC-enabled devices, such as smartphones or smartwatches, to make secure transactions at point-of-sale terminals. NFC payments are becoming popular because they offer convenience, speed and security for both customers and merchants.

In this article, we will discuss how NFC payments work, the benefits and disadvantages of using them and some reasons why businesses prefer them.

What is NFC?

NFC stands for Near Field Communication. This technology enables communication and data-sharing between wireless devices nearby. It is easy to use and has become increasingly popular for mobile payments. Unlike traditional credit card usage, which requires swiping or inserting a card, NFC payments allow you to tap your NFC-enabled device on payment terminals to complete transactions. There are now NFC-enabled contactless credit cards too, enabling users to tap and pay.

NFC allows wireless devices to establish connections and exchange data, typically within a few centimetres. This technology is commonly used for access control systems to allow secure entry, ID verification to allow contactless payments and seamless device pairing to allow file sharing or connecting to peripherals.

This technology is useful for a variety of businesses and use cases. For example, retailers can offer contactless payments to enhance customer experience and improve transaction speed. Businesses can also utilise NFC for inventory management and asset tracking.

What is NFC Payment?

NFC payment refers to using Near Field Communication technology for making contactless payments. This technology enables secure and convenient payments without needing cash or cards to be swiped or inserted.

NFC payments are ideal for businesses of all sizes as they provide a seamless and efficient payment processing option. Modern mobile phones are equipped with NFC technology, allowing you to make payments through various options such as payment apps, digital wallets or UPI. With NFC mobile payments, you can make quick and secure transactions with just a touch.

 Related Read: What are the Different Types of Digital Wallets?

NFC Payment Examples

NFC payments have revolutionised how you handle transactions, making online payments seamless and secure.

Examples of NFC payment apps include the following:

1. Apple Pay 

Tailored for iPhones and Apple Watches, it lets you make secure transactions by tapping your devices near NFC terminals. Card details stored in Apple Wallet are safeguarded by Touch ID or Face ID, and payments employ tokenisation for added security.

2. Google Pay

It facilitates swift and secure NFC payments. Like Apple Pay, card data can be stored on the app and authenticated via a fingerprint or PIN. Tokenisation is the key to reinforcing transaction safety. Google Pay’s tap-to-pay feature currently only works on Android phones.

3. Samsung Pay

It stands out with Magnetic Secure Transmission (MST) technology alongside NFC. This allows Samsung devices to mimic traditional card strips. This versatility makes Samsung Pay compatible with older terminals. 

How do NFC Mobile Payments Work?

NFC stems from Radio-Frequency Identification technology (RFID) that uses radio waves for data transfer. NFC has gained popularity for contactless payments, particularly in recent years. Setting up to accept NFC payments is similar to traditional credit card processing, often with the same equipment.

3 Main Modes through which NFC Payments Work

NFC payments use contactless payment technology and primarily work through

1. Peer-to-peer

2 NFC-enabled devices can exchange information by making them touch each other.

2. Read / write

An NFC device can read information from an NFC tag or write information to it.

3. Card emulation

It allows an NFC device to act as a contactless payment card.

How Can Merchants / Businesses Set Up NFC Payments?

Setting up NFC payments involves six main steps:

STEP 1: Select a payment processor

Choose a reliable payment processor that supports NFC mobile payments, such as Razorpay.

STEP 2: Choose an NFC-enabled reader

Purchase an NFC-enabled card reader or POS terminal from a trusted vendor.

STEP 3: Install payment processing software

Download and install the necessary software the payment processor provides to integrate NFC functionality into your existing payment system.

STEP 4. Connect to the Internet

Ensure your device is connected to a stable Internet connection for seamless transactions.

STEP 5: Set up a merchant account

Create a merchant account with your chosen payment processor, providing all required information and documents.

STEP 6: Start Accepting payments

Start accepting NFC payments by activating the NFC feature on your reader and guiding customers on making contactless payments using their smartphones or smart cards.

How Can Merchants Accept NFC Payments?

Merchants can accept NFC payments by using NFC payment devices. These devices are equipped with NFC technology, allowing you to make contactless payments by tapping your NFC-enabled smartphone or cards.

How Can Customers Make NFC Payments?

You can make NFC mobile payments by simply tapping your NFC-enabled mobile device or contactless card on an NFC payment device. The device uses RFID technology to securely transmit payment information between your device and the payment terminal, allowing quick and convenient transactions.

9 Reasons Why Businesses Use NFC Payments

1. Easy and convenient

NFC payments provide customers with a seamless and hassle-free payment experience, allowing them to make transactions quickly with just a tap of their NFC-enabled mobile devices.

2. Speed

NFC payments expedite the checkout process, outpacing cash handling and traditional card-swiping methods. According to a Mastercard study, contactless payments are up to 10 times faster than other in-person methods.

3. Faster checkout

By eliminating the need for physical cash or cards, NFC payments reduce waiting times at the checkout counter, improving customer satisfaction.

4. Variety of payment options

NFC technology supports various payment options, such as credit cards, debit cards, mobile wallets and UPI payments, giving customers flexibility in choosing their preferred payment method.

5. Safe and secure

NFC payments are encrypted, comparable to chip-enabled cards, and more secure than card swiping. This ensures that customer payment information remains protected from fraudsters and hackers.

6. Paying through devices is the new normal

With increasing numbers of consumers embracing digital payments, businesses are adopting NFC technology to meet customer demands and stay ahead of competitors.

7. Improves customer engagement

NFC payments enable businesses to create personalised loyalty programs through digital wallets or dedicated payment apps, fostering stronger customer relationships and driving repeat business.

8. Contactless payments are the future

The pandemic has accelerated the adoption of contactless technologies like NFC payments as they minimise physical contact between customers and merchants.

9. Adaptability has reduced costs

Adopting NFC payment devices eliminates the need for expensive point-of-sale infrastructure upgrades since most modern smartphones already have built-in NFC capabilities.

Different Types of Businesses That Use NFC Payments

NFC payments are widely used across various industries as they offer convenience, speed and security. Many businesses have adopted NFC payments to provide a seamless payment experience to their customers. One of the major advantages of NFC payments is their versatility, making them suitable for a range of businesses.

  • Brick-and-mortar retailers find NFC payments advantageous as they handle multiple transactions daily. With NFC mobile payments, you can simply tap your smartphone on the payment terminal to complete the transaction swiftly.
  • Mobile retailers such as street vendors also benefit from using NFC payment devices as they eliminate the need for cash and enable quick and contactless transactions.
  • Restaurants and food trucks have increasingly started to adopt NFC payments to streamline ordering and payment. You can make secure payments using smartphones or wearable devices. This reduces wait times and enhances customer satisfaction.
  • Healthcare providers, fitness / recreation facilities, charities / non-profits, and professional service providers like salons or consultants can also leverage NFC technology to accept digital payments. By embracing NFC payments, these businesses provide a convenient payment option, enhance efficiency and reduce administrative overheads.

Advantages & Disadvantages of NFC Payment

TOP 5 Advantages of NFC Payments

1. Convenience

NFC payments offer a convenient and hassle-free payment experience. You can make payments quickly and easily with a simple tap or wave of your NFC-enabled device.

2. Flexibility

NFC payments can be made using various devices such as smartphones, smartwatches, or contactless cards. This flexibility allows you to use a device of your choosing.

3. Suitable for various business types

NFC payments are suitable for businesses of all sizes and types. Whether it is a small retail store, a restaurant, or an online business, accepting NFC payments can cater to customers’ diverse needs.

4. Seamless payments

NFC technology enables fast and seamless transactions. Customers can complete their purchases in seconds, reducing waiting times and enhancing overall customer satisfaction.

5. Enhanced security 

NFC payments incorporate multifactor authentication, making them more secure than traditional credit card transactions. Encryption technology ensures that customer data remains protected during the payment process.

TOP 3 Disadvantages of NFC Payments

1. Transaction fees

For larger businesses processing a high volume of transactions, the cost of NFC payments can add up due to transaction fees charged by banks and payment service providers.

2. Security concerns

While NFC payments are generally secure, there is still a risk of hacking or unauthorised access to financial information during the transaction process. Businesses need to invest in robust security measures to mitigate these risks.

3. Potential for fraud

Since NFC payments eliminate the need for employee involvement in handling customer devices, there is a potential for fraudulent activities such as unauthorised transactions. Businesses need to stay vigilant and implement additional security measures to prevent fraud.

Frequently Asked Questions (FAQs)

1. How can customers pay using NFC?

You can tap your mobile devices or cards on an NFC-enabled payment terminal. The payment information is securely transmitted between the device and the terminal, allowing for a quick and contactless transaction.

2. Are NFC payments safe?

Yes, NFC payments are generally considered secure. The technology uses encryption to protect sensitive payment information during transmission, making it difficult for fraudsters to intercept and misuse the data.

3. Are NFC and UPI the same?

No, NFC and UPI are not the same. NFC (Near Field Communication) is a technology that enables contactless communication between devices, allowing for quick and convenient transactions. On the other hand, UPI (Unified Payments Interface) is a real-time payment system in India that facilitates instant fund transfers between bank accounts using mobile devices.

4. What is the transaction limit for NFC payment?

The transaction limit for NFC payments varies depending on the bank or payment service provider. In India, most banks have set a maximum limit of Rs 2,000 per transaction for contactless payments without entering a PIN. 

5. What devices can be used for NFC payment?

A wide range of devices can be used for NFC payments, including smartphones, smartwatches, and even certain credit / debit cards with built-in NFC chips.

6. What’s the difference between NFC and RFID?

Both NFC and RFID use radio waves for communication. However, NFC is a subset of RFID and has more advanced capabilities. While RFID is primarily used for identification and tracking purposes, NFC allows for two-way communication between devices within close proximity. 


Khushali is a content marketer at Razorpay. A logophile, traveler and inbound marketing enthusiast, she loves questioning the 'why' and 'how' of almost everything.

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