What is NFC and What Role Does it Play in Mobile Payments?

We've been getting a lot of questions on NFC, so we thought we would do a quick overview post. 

NFC stands for "near field communications" and refers to a type of very short range radio frequency identification (RFID) technology. 

It's getting a lot of recent attention because Google, Apple and others are planning on using NFC in their mobile payments product lines.  Basically, NFC turns a cellphone into an electronic wallet and payments device.  The picture below shows Visa's NFC payments system in action.

NFC is like Bluetooth in that it allows computing devices to share data wirelessly.  But NFC only allows the the exchange of information between two devices at very short ranges. 

The industry claims a range of up to 4 inches.  But my experience is the effective range is usually less than 2 inches. 

A key advantage of the short range is security.  To steal a NFC datastream requires the offender to be within 4 inches, or less, of the device sending the stream.  This is obviously hard to do.

NFC data is also encrypted, and the combination of range limitations and encryption makes NFC a very secure wireless protocol. 

NFC is a mature technology long used in both industrial and consumer applications.  In Japan, for example, it's common to use NFC enabled cellphones to pay for subway tickets. 

There are no guarantees NFC payment systems will be successful in the U.S.  But having both Google and Apple pushing it means it has a good shot. 

See our recent mobile payments roundup post for more on NFC and mobile payments. 

Comments

[model train information]

I've got no idea about NFC but it is a lot better compare to other exchanged devices. Hackers could hardly copy this because it has high quality rate of security.

[Rick Demko]

I'm always a fan of being able to both receive and make payments very quickly (you don't want anyone to change their minds right?). It looks like this is quite a bit more secure than the credit cards some carry now. This signal has to be sent from your phone in order to be received, meaning if you're on the subway someone just walking past (at two inches) won't be able to hijack the signal.

[Simon]

This sounds like a better system in securing your funds transactions, as opposed to the scan chip method. I still prefer to use good old cash money.