At Software Advice, many retailers ask about mobile payments and often find the subject confusing. That’s understandable—the market is fragmented, and although the technology has advanced, widespread adoption remains limited.
Besides the shortage of NFC-capable handsets, another reason adoption is slow is the lack of consumer demand: most merchants still don’t accept mobile payments. Retailers can play a pivotal role in changing this by learning how the technology works and whether they can already accept these payments. Below are clear answers to the most common questions we hear.
What are NFC mobile payments?
NFC (near field communication) mobile payments occur when an NFC-enabled mobile device communicates with an NFC-capable terminal. Payment information is stored and managed in a virtual wallet app, such as Google Wallet or other similar solutions. The interaction is contactless and usually requires the customer to hold or tap their phone near the terminal to complete the transaction.
What do consumers need?
Consumers need a smartphone equipped with an NFC chip and a compatible mobile wallet app. With an NFC-capable phone, paying is as simple as waving or tapping the device near an NFC-enabled reader. Consumers should confirm their phone supports NFC and that they have installed and configured a virtual wallet.
What do retailers need?
Retailers must first meet the standard prerequisites for accepting card payments: a merchant account, a payment gateway, and point-of-sale (POS) hardware or software. To accept NFC mobile payments, retailers also need either a standalone NFC reader or a payment terminal that supports ISO 14443 (the standard many contactless card and device readers use). Standalone NFC receivers are generally less expensive than full-featured, high-end payment terminals, offering a lower-cost entry point for merchants who want to begin accepting contactless mobile transactions.
Which NFC initiatives should retailers watch?
In the United States, retailers should monitor Google Wallet and ISIS (a mobile wallet consortium that has been testing deployments in selected markets). Other global initiatives include carrier and bank-led solutions in the UK and Europe. Companies such as PayPal have also tested NFC projects in various markets and trialed self-service payment options in certain retail environments. Keeping an eye on these projects helps merchants anticipate which wallet platforms customers might use at checkout.
How much will NFC payments cost?
Contactless payments based on virtual wallets typically use the same contactless standards as card-based systems like MasterCard PayPass and Visa payWave. As a result, transaction costs to merchants are often comparable to existing contactless card transactions. Retailers should watch for pricing adjustments by card networks or acquirers that could incentivize NFC acceptance—networks have in the past introduced pricing incentives to stimulate adoption in specific markets.
How secure are NFC mobile payments?
Security is a critical factor for mobile payment adoption. While NFC payments can be implemented securely, vulnerabilities in wallet software or device implementations have been reported and receive broad attention when discovered. Developers, device manufacturers, and payment providers must prioritize security—using techniques such as tokenization, secure elements, and up-to-date app and OS security—to build trust and enable wider acceptance.
What should retailers do today?
NFC payments are unlikely to become ubiquitous overnight—the supporting ecosystem is still evolving. However, retailers can take proactive steps now: educate themselves about available technologies, evaluate whether their current payment systems can be upgraded to accept NFC, and stay informed about local deployments and pilot programs. Having a forward-looking strategy will allow merchants to adapt quickly when contactless mobile payments gain traction among consumers in their market. Examples of early deployments to watch include contactless trials in transit, taxis, and quick-service restaurant pilots.
If you want additional resources and more detailed FAQs on mobile payments and retail technology, consult reputable retail payment guidance and vendor-neutral industry articles to help plan your acceptance strategy.