The Art of (Near Field) Communication: Cards, Bags, and More

The city of New York runs on NFC technology, or at the very least, this New Yorker certainly does. Near Field Communication (or NFC) technology allows a reader and a chip to send information over a short distance using a shared frequency. The key fob I use to enter my building leverages it, as does the digital wallet I rely on to pay for my daily bagel. The cards I carry and even my purse itself uses NFC technology. Odds are, if you took the subway to work this morning, you relied on NFC technology too.

NFC technology offers many benefits. Chips do not require their own energy source, so they can be added to non-electronic products like festival wristbands or credit cards. It’s also quick, as tapping a card on a payment terminal is faster than fumbling to insert it into a card reader. Plus, it’s more hygienic. NFC transactions from digital wallets often use the biometric verification methods on users’ phones, like Face ID or fingerprint scans, whereas traditional chip readers often rely on manually entered PINs or signatures, requiring users to touch rarely sanitized payment terminals. As NFC technology becomes ubiquitous, its uses in the financial sector can expand beyond just payments.

Payments and Beyond

Every Apple phone since the iPhone 7 is bestowed with NFC powers. This technology is what underpins the firm’s ubiquitous Apple Pay functionality, with which the firm processed $6T in payments in 2022 alone. Apple actively incentivizes Apple Card clients to engage with their phone’s NFC functionality, offering 2% cashback on all purchases made with their phone’s tap to pay, over the 1% for physical card transactions. Beyond functioning as a contactless payment, the iPhone is also an NFC reader. As such, it’s an excellent tool for small business owners. Gone are the days of clunky, expensive third-party payment terminals, Apple allows businesses to accept contactless payments with just their phone, with firms like Venmo and Square offering this point-of-sale functionality for business accounts.

Within the Apple software ecosystem, Apple Wallet leverages the NFC chip on physical cards to quickly add a digital version to user’s wallets, helping eliminate typing errors for lengthy card numbers. When adding cards to the wallet, users need only hold an NFC-enabled card to their phone, et voila! A new card appears in their wallet. Similarly, American Express lets clients confirm their receipt of a new card by tapping it to their device.

Capital One takes contactless functionality in another direction, allowing users to verify their identity before looking at sensitive data or changing contact information, instead of the traditional one-time code verification. The journey itself helpfully includes a dotted line to show users where to hold their card to ensure the chip aligns with their device’s reader. This allows users to avoid the tedious process of fielding codes throughout the authenticated experience, after they have already successfully logged in, while still allowing the firm to add a frictional layer between the outside world and sensitive information.

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