NFC Payments Ecosystem and User Experience

NFC Payments – NFC or technology in this article is neither new nor a revolutionary innovation its there on this planet since decades, but not all of us have been aware of it. We will discuss the functioning of NFC payments in this blog post. Potential items encompass cell phones, smart watches, tags, gadgets, and computer systems. Collaborative efforts enable the realization of NFC payments. Our investigation involves studying the ease of utilizing mobile phones for payment purposes and detecting any challenges that individuals may encounter when doing so.

The assumption taken here is that the reader is fully versed in mobile payment through a mobile wallet, or mobile money, which is a solution that lets people conduct banking transactions with ease, directly from their mobile device, in a secure and convenient manner.

NFC – Outlook

Although NFC has existed for some time now and is not a special or remarkable kind of technology, it is still interesting to see its use in the payments sector.
Not everyone has been made conscious of its existence. NFC based payment using smartphones is possible but very few stores and financial institutions have adopted this technology. There is a concern that individuals might not find it appealing. Insufficient acceptance by banks and stores has led to limited usage of the product by the vast majority of individuals. Mobile payment using NFC has been around for a long time, but banks and retailers are hesitant to participate due to fear of a low adoption rate, since the lack of participating banks and retailers is the precise reason for the low adoption rate.

NFC is an easy and simple concept, but some times it gets oversimplified along with the same reasons for payments under mobile, or a simplified version of mobile payments, about which every single company on this earth is talking these days, and it’s true for every single company.  Having a full understanding of the business and technologies, we can now get some ideas on how to marry both of these to gain some cost and speed effectiveness. In the event that detailed information or deliberation is needed on any part, please feel free to get in touch directly.

Introduction: NFC (near-field communication) allows two devices placed within a few centimeters of each other to exchange data; both have to be equipped with an NFC chip. This is a major contributor to reducing the time to pay for the services or goods and giving a feeling of touch and run. If we had a Ministry of Innovation for regulation and control on a global level, today’s work and innovation may have been impossible or must have stopped long ago.

Apple Pay (as per news, 10 million handsets were sold in the first 3 days of launch) from a technology perspective was neither a new offering nor a game changer and is now followed by almost every big player in the industry. Without a doubt, that launch was to set a trend for NBFTC (non-banking financial and technology companies) on how to enter into payments and did its job well, so-called banking domain, and eat the share.

When Apple decided to jump on board (Sept. 2014), the game changed because all of a sudden it was like an indication of a guaranteed massive user base for this type of technology and service. Unlike most of the MNOs, which keep on focusing and growing the mobile network in a positive way to penetrate these or other isolated areas, millions of people are now able to connect via a mobile phone.

Main Story: Rapid advancements in mobile technology are changing the way we live, from the way we connect with others to the way we manage our finances. Technological innovations have made certain aspects of our daily lives that much easier.

The advent of mobile money has given those who were previously unable to conduct monetary transactions an easy and affordable alternative to traditional bank accounts. Mobile payment services do not necessarily need to be connected or linked directly to your bank account. Security is the first thing when it comes to mobile payments, and the way Apple handles it is very commendable.

Its approach to the secure element is a physical chip, which is only available in the iPhone 6 and 6 Plus. Each time a user initiates a transaction, the SE assists in generating a random, one-time-use code in lieu of transmitting the user’s debit or credit card number. After hearing about Apple Pay, it slowly penetrated people’s brains, and I also thought I might be able to do the same thing with my Note 3. I don’t know what the magic is behind Apple’s appeal, but it sure does draw and retain a significant user base, and apparently very loyal ones too. There seems to be a lack of advertising for this feature; I’m not sure why. Maybe now that Apple, Android, and Samsung are going to bring it to billions,

Previously, recharging a prepaid mobile number meant adding more airtime, but now we are able to add money to it, keep our credit cards and loyalty point coupons, access our bank accounts, and use it like our ordinary wallet for payments. NFC is a special instrument to play mobile payment tunes or a ticket to a cashless future, and it will be a good solution that finally shields wallets from theft and fraud. Many retailers already have NFC-based contactless payment terminals in place, making the transition to mobile payments easy.

Phones compatible with Google, Apple, Samsung, and Android can use these terminals. I just like plain old consumer electronic devices, all with pros and cons, and assume that in this industry, image plays a big role and that big players marketing and product design teams own the playing field. It’s too bad that useful technologies such as NFC payment didn’t catch on earlier due to other companies failing to market them correctly or lacking the type of user base as few big players.

The concern around security in NFC-based mobile payments is a little less, as in the process of payment, after launching the payment application, the handset is touched on the POS or MPOS terminal and a connection is made using NFC. At this point, the customer may be asked to scan their finger or enter a passcode to approve the transaction. The transaction is then validated with a separate chip called the secure element (SE), which relays that authorization back to the NFC modem. From there, the payment finishes processing the same way it would in a traditional credit card swipe transaction. Innovations in mobile money have made a drastic change in the way people pay for goods and services.

Now most of the operators across the industry, especially in Africa, are progressing on a service that provides a global money clearing house or international remittance hub for mobile payment services, offering interoperability between mobile money service providers networks. A very interesting fact in the mobile financial industry is that we usually receive funds once or twice a month as part of our salary or fee, but spending is done at least three times a day, sometimes over five times.

This method of spending is known as “micropayment” or “microspending.” Putting in numbers, this can go into billions of dollars. An easy example: if we start charging 1 cent per transaction as commission for micro-payments through NFC (the stored value card technology) for food, drinks, snacks, petrol, tolls, souvenirs, or any similar purchase, and each one of us spends a minimum of $5 a day (assumed at 40% of the world population), then the total commission earnings will be to the tune of $4.3 billion per month. This market has clearly not been explored that well, and this also goes straight into the mobile money market as a potential plug.

The main drivers behind the success of mobile money are the explosive growth in the number of mobile devices and the fall in the cost of computing power, which have lowered the barriers to new entrants in this field. The most important step in a mobile payment transaction is the secure element, which holds all the authorization power.

Whether it’s a chip in the phone or functions virtually in the cloud, the secure element is tamper-proof and protected by a unique digital signature. Mobile money (m-money) is quite versatile and can support a variety of services, in particular person-to-person (P2P) money transfers, which are of significant value for emerging economies. The other key driver for this is the inaccessibility of banking services to the general populace, mainly due to poor infrastructure and a lack of trust in local banks among countrymen and companies.

Mobile payments will be a 3–4 trillion euro market by 2020, as the world is running to get their bite of the payment cake, including Apple, Microsoft, Facebook, and many other big players. So manufacturers need to ensure very high security for users to gain their trust and secure their transactions with secure element chips. The architecture of the secure element chip should be designed to be hardened against attacks on the phone. Why can’t you and me get some small dust out of it? NFC has been used for ages but has never gained much attention. As we all know, NFC is a wireless communication technology that permits data transfer over distances of up to 10 cm based on the ISO/IEC 18092 standard. Based on radio frequency identification (RFID) technology, it has been used in various industries, including retail, automobile, medical, transportation, and manufacturing.

The primary uses of NFC are

• Connect electronic devices, such as wireless components in a home office system or a headset with a mobile phone.
• Access digital content using a wireless device such as a cell phone to read a “smart” poster embedded with an RFID tag.
• Two devices read and write to each other using NFC, touching two handsets together to transfer data like contacts or photos, normally called “two-way communication.
• Device reads and writes to an NFC chip. Touch and go concept, like in the Apple case, where touching an Apple NFC device on an NFC reader or NFC POS to debit a wallet or card for mobile payment balance is written to the card normally.
• Make contactless transactions, including those for payment, access, and ticketing.

Banks must weigh the potential return on investment before considering making a significant investment to compete with the growing prominence of payment options like PayPal. PayPal has secured an initial advantage as a result of being the first to market, and financial institutions, heavily regulated and with obligations to national and continental entities, must adhere to more rigorous regulations and safety measures.

In addition, it is crucial for them to assess whether their clientele will transition with them to a modern, technologically advanced, and adaptable era or if the majority will enthusiastically opt for the new economical or cost-free services that have emerged as a result of the digital transformation. Banks will persist in their efforts to assure customers of their genuine concern and dedication towards making their lives simpler and more cost-efficient through the implementation of secure and innovative payment methods.

The widespread adoption of mobile money can be attributed to the increasing accessibility of phones and the reduced costs of computers. Facilitating the process makes it less complicated for emerging businesses to provide services related to mobile money. Mobile money proves to be highly beneficial by enabling seamless transfers of funds between individuals. This is particularly beneficial for nations that are in the process of growth and advancement.

M-money refers to performing financial activities such as making payments using mobile devices such as smartphones and tablets. Spending money could take the form of paying bills or making purchases. Mobile financial services are the terms used to describe the money-related transactions and offerings that are conducted through mobile devices.

There is a possibility of a connection to a bank account, but it is not definite. In 2012, the idea of utilizing mobile phones for making purchases was a topic of discussion among numerous individuals. Starbucks and other corporations revealed their proposals for employing mobile payment systems. The terms “m-money,” “mobile financial services,” and “e-money” are frequently utilized in technical literature and news reports.

Banks must exploit technology, and leverage existing MNO infrastructure to acquire customers, enrich use cases, lower costs, and increase revenue, especially in markets where regulators (such as reserve banks) play a dominant role. As a result, mobile payments have become a viable alternative to traditional payment methods such as paper, plastic, online, or even bank account payments.

Conclusions: What are the implications of an NFC-based mobile payment solution? Is it going to change the world, be a significant “win” or be a nice hack? NFC-based mobile payments can be supported globally and will give financial institutions and partners greater choice in offering consumers secure ways to pay with smartphones. The time has now come for banks and other entities with an interest in financial service provision to step up as one team.

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