Morgan RileyNear field communication (NFC) is a state of the art technology that enables quick and simple information transfer between devices with only a touch. This technology has made it possible to make contactless payments and use digital business cards, as well as to share data more easily and couple devices for a solid connection.
Despite its rising acceptance and popularity, NFC technology has several drawbacks. Understanding NFC’s complexities, benefits, drawbacks, and uses across many industries can help one see more clearly both its transformative potential and the difficulties that still lie ahead.
In a Nutshell
- Near field communication (NFC) is a short range wireless network technology that makes it simple and quick to transfer data between devices that support it.
- Numerous products, including smartphones, tablets, computers, and wearable electronics, utilise this technology.
- The usage of NFC technology has transformed numerous global sectors, including that of payment cards.
- The three forms of NFC technology’s capabilities are peer to peer, card emulation, and reader/writer.
- NFC technology has significant limitations despite its many benefits, including its convenience, security, and sharing possibilities. Power restrictions and potential security concerns, such as exposure to cybercrime and digital pickpocketing, are some of these.
- In addition to payment processing, NFC is helpful in a number of other industries, including healthcare to track patient statistics, transportation to expedite boarding, and hospitality to control entry to buildings.
- NFC has a bright future and has implications for many different industries. However, carrying backup payment options and the associated security threats continue to provide difficulties.
Understanding Near Field Communication (NFC)
Near field communication (NFC) transmits data via electromagnetic radio fields to enable two devices to communicate with each other. For it to work, both devices must contain NFC chips, as transactions are conducted at very close range. NFC enabled devices must be in physical contact or within a few centimeters of each other for data transfer to occur.
The beauty of NFC lies in its simplicity – a simple tap, and so much happens.
Renรฉe James, CEO, Ampere Computing
Because the receiving device reads your data the instant you send it, near field communication (NFC) greatly reduces the possibility of human error. Rest assured, for example, that you cannot inadvertently buy something by a pocket dial or by walking past a store that has an NFC chip embedded in it (called a “smart sign”). With near field communication, you must perform an action intentionally.
In fact, even after NFC technology becomes universal, users may still need to carry a backup payment method. You can do almost nothing with a device whose battery is dead. However, it remains to be seen whether this will be a permanent drawback of NFC technology.
As with any evolving technology, merchants need time to upgrade their equipment to be able to process NFC transactions, so for the time being, consumers should continue to carry cash or payment cards.
How does Near Field Communication (NFC) Technology Work?
Near field communication (NFC) technology works by combining four key elements: an NFC microchip inside a device, which acts as an antenna and receiver, a reader/writer that scans and allows NFC devices to access the data, an NFC software application on the device that can use the data received by the NFC chip, and an information or communications service provider (ISP) that manages all device communications that occur through the ISP.
NFC is an extension of RFID technology, which relies on radio waves to track goods, supplies and merchandise. NFC replaces RFID chips with microchips capable of storing and encrypting information. While RFID devices are passive and therefore lack the ability to access information, NFC enabled devices do.
For example, you can pay for your purchases with NFC enabled debit and credit cards. When you touch your card to an NFC enabled payment terminal, data is transmitted between your card and the payment processing system to complete the transaction. An NFC enabled device can operate in three different modes: reader/writer mode, peer to peer mode and card emulation mode.
Read/Write Mode
A reader/writer is an NFC enabled device that manages and coordinates information sent and received by two or more NFC devices and a handful of other devices that do not yet have NFC technology. Examples of reader/writers include point of sale (POS) systems, cell phones, tablets and RFID enabled cards. In reader/writer mode, NFC enabled devices communicate and exchange data following the instructions of the reader/writer.
Peer to Peer mode
This P2P mode allows two NFC enabled devices to exchange information directly. For example, a P2P device can exchange data with an RFID enabled device or some other type of NFC device without the aid of a reader/writer.
Card Emulation Mode
In this mode, an NFC enabled device functions as an NFC payment card or virtual credit/debit card. When an NFC enabled device is activated in this mode, it emulates a payment card or other physical card in card readers, magnetic stripe readers and contactless card readers used to make payments directly from the mobile device.
History of Near Field Communication (NFC)
Near field communication (NFC) is perhaps best known as the technology that allows consumers to pay merchants and each other with their cell phones. NFC powers payment services such as Google Wallet (NASDAQ: GOOG) and Apple Pay (NASDAQ: AAPL), for example. While NFC is not currently present on the Amazon Echo (NASDAQ: AMZN), it is a good example of where near field communications could be useful. For example, if you want to pay for a pizza (or anything else) you just ordered via the Echo.
Near field communication (NFC) technology has its roots in radio frequency identification (RFID), which has been used for decades by retailers to tag and track products inside stores. Near field communication (NFC) technology began to gain traction in 2004, when Nokia (NYSE: NOK), Philips (NYSE: PHG) and Sony (NYSE: SNE) joined together to form the NFC Forum, a non profit organization that is committed to bringing the convenience of NFC technology to all aspects of life.
In 2006, the Forum formally outlined the NFC technology architecture, whose specifications continue to provide a roadmap for all stakeholders to create powerful new consumer facing products.
Nokia launched the first NFC enabled phone in 2007, and by 2010, the telecommunications industry had launched more than 100 NFC pilot projects. In 2017, New York’s Metropolitan Transit Authority (MTA) phased in a system that allows commuters to pay for their subway tickets with NFC technology, and the rest, as the saying goes, “is history.”
Advantages of Near Field Communication (NFC)
The implementation of near field communication (NFC) technology has several advantages. These include :
Convenience
NFC enabled devices can replace any card or cash with which a transaction can be made. Since NFC enabled devices can store multiple credit cards, for example, you don’t need to carry them all in your purse or wallet, instead, you can pay for purchases by accessing your virtual wallet on the NFC enabled device.
Security
NFC uses 128 bit or higher encryption to ensure the security and privacy of transactions. Because NFC uses tokenization instead of storing credit card information, for example, no merchant can see your credit card number.
Share
Sharing content, goods and money with friends and family is easier when you give them access to your NFC enabled device. For example, if you send a file to an NFC device with the peer to peer feature enabled, the file will be sent immediately.
Targeted and context specific advertising
Advertisers can use near field communication (NFC) technology to deliver personalized ads to consumers’ NFC devices. When a consumer touches an ad displayed on a device, it can be personalized based on their interests, location or other personal information.
Inconveniences and Security Risks of Near Field Communication (NFC)
Although near field communication (NFC) technology offers many advantages, it also has some drawbacks and potential risks. These include :
Power limitations
Since NFC enabled devices rely on battery power, they must be charged periodically. This can result in users forgetting to charge their devices before making or receiving payment for a purchase. And if a device runs out of battery power during a transaction, the transaction may be interrupted or the transaction may be incomplete or fail.
Safety issues
When Near field communication (NFC) technology operates in peer to peer mode and because NFC enabled devices store personal information, these devices are vulnerable to security breaches, including cybercrime and digital pickpocketing.
Hackers and cybercriminals may attempt to gain access to NFC enabled devices. They can develop malicious software that can steal sensitive information from these devices. In addition, hackers can create tokens that mimic an NFC enabled device and gain access to this sensitive information.
Digital pickpocketing
One of the main uses of near field communication (NFC) technology today is payment by phone. Since NFC enabled phones are frequently used for payments, digital pickpockets could use these programs to steal credit card data from unsuspecting customers by intercepting payment information.
Although cybercrime and digital pickpocketing are the main vulnerabilities of Near field communication (NFC) technology, there are steps you can take to protect yourself. First, make sure the NFC enabled devices you carry have the latest security features, such as 128 bit encryption and two factor authentication. If you lose a device or suspect it has been compromised, immediately change your passwords and disable all sharing and peer to peer sharing features.
Near Field Communication (NFC): Beyond the Payment Process
With its ever expanding boundaries, near field communications has a wide variety of uses beyond simplifying and speeding up the payment process. Today, hundreds of millions of contactless cards and readers around the world use NFC technology in a myriad of applications, from securing networks and buildings to inventory and sales control, preventing vehicle theft, checking books in libraries and managing unmanned tolls.
NFC is behind the cards we swipe through card readers at subway turnstiles and bus turnstiles. It’s present in speakers, appliances and other electronic devices that we monitor and control through our smartphones. With just one touch, NFC can also configure WiFi and Bluetooth devices throughout our home.
The first use of NFC technology was for contactless payment systems. In the early 2000s, NFC enabled credit and debit cards were introduced, allowing customers to make payments by simply bringing the card close to a payment terminal.
NFC offers both Short and Long Term Solutions
Near field communication (NFC) is proving useful in numerous industries and have far reaching implications. Such as:
Health
- Monitoring of patient statistics: near field communication (NFC) opens up new possibilities for home monitoring, as NFC enabled wristbands can be configured to track patients’ vital signs. The patient touches the wristband to a smartphone or tablet, and their medical data is transmitted to the doctor’s office, where a professional can check it. With its simple, “just touch” instructions, NFC enabled devices could allow patients of any age to monitor their health status autonomously.
- Patient care management: near field communication (NFC) in the hospital setting allows medical staff to know where people are and who has done what. Staff can know, in real time, where a patient is, when a nurse last visited or what treatment a doctor has just administered. NFC enabled wristbands can replace traditional patient ID bracelets in the hospital and be updated with real time information, such as when a medication was last administered or what procedure needs to be performed at what time.
Airlines
In 2012, Japan Airlines (OTCMKTS: JAPSY) became the world’s first commercial airline to allow passengers to tap standard NFC phones to swipe through boarding gates instead of paper boarding passes. The customer experience at airports using near field communication (NFC) technology is greatly improved, as NFC can shorten the boarding of a 450 passenger aircraft to just 15 minutes, a process that normally takes 40 minutes without the use of NFC.
Hospitality, travel and leisure
In the hospitality industry, a hotel can manage access to buildings and rooms centrally and in real time, without the need to physically hand over key cards. Instead, it is enough to bring the phone close to the door lock. With NFC technology, a hotel can send a guest’s room access rights directly to his or her mobile device prior to arrival. An NFC hospitality app can also include other functions, such as booking a room and skipping the check in phase.
Wrap Up
Near field communication (NFC) technology has evolved as a remarkable tool for facilitating seamless and efficient communication between devices. Its applications span across numerous sectors from payments to healthcare, airlines, and hospitality. However, the technology comes with its set of limitations such as dependency on device battery and potential security vulnerabilities.
FAQs
Near field comunication (NFC)is a short range wireless networking technique that permits data transfer between devices that are close to one another, usually just a few millimeters apart. Contactless payment methods and data transfer between cellphones are two of its most popular applications.
NFC on your phone enables you to interface with RFID enabled cards and other NFC enabled devices, conduct contactless payments, and transfer information wirelessly.
It is suggested to turn off NFC while not in use due to power consumption and potential security issues.
There is no proof, according to science, that NFC is bad for your health. NFC emits radio frequency radiation, however it isn’t strong enough to be dangerous.
Although the likelihood is slim, it is technically possible for a device to be compromised using NFC. This risk can be reduced by using appropriate security measures and vigilance when connecting to unidentified devices.
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- TechTarget – Near-field communication (NFC)
- Digital Trends – What is NFC? How it works and what you can do with it
- STMicroelectronics – NFC Technology – Essentials & Insights
