What are NFC payments?

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What are NFC payments?


This content is contributed or sourced from third parties but has been subject to Finextra editorial review.

Apple is being sued by the US Department of Justice for an alleged monopoly on smartphones, with NFC technology playing a large part in the argument.

Apple tap-to-pay uses NFC technology to enable its payments, but as it stands in the US, no other digital wallet can be used on their mobile devices.

It’s important to look at what NFC payments are and how Apple has faced criticism over maintaining exclusivity of them on their devices.

How do NFC payments work?

In practice, using an NFC payment functions similarly to using a contactless card, but with the convenience of not needing to carry a wallet. Once the app is set up with your card details, you just hold your mobile phone over an NFC-enabled device and it is usually as simple as that.

NFC or near-field communication, starts with a chip in your mobile device. This will allow the chip to communicate wirelessly with another NFC-enabled device for data transfers, such as a card reader at your local bakery. They do not need Wi-Fi or data connectivity to work.

What makes this appealing for use in payments is that they only work in close proximity to the other devices and don’t need connections or permissions like you would on a Bluetooth device. The two devices need to be within about four centimetres of each other.

There is also two-way encryption on the NFC-enabled devices, making it harder for hackers to intercept this information.

However, there are still some security concerns over this technology, such as an interception attack between the two devices, data interception or stolen phones.

Will Apple win this lawsuit?

Apple recently faced a similar lawsuit in Europe, although this was a much narrower case focused specifically on the NFC technology.

At the start of this year, Apple announced they will be opening up the NFC capabilities on their phones to other providers to make contactless payments. This was in an effort to end an anti-trust charge from the European Commission, the investigation for which started in 2020.

Previously, only Apple Pay was able to be used on Apple iOS mobile devices for payments, leading to many complaints over the prevention of competition.

This new agreement will allow approved developers in the European economic area to access iPhone NFC payments. This commitment would remain in place for 10 years. Developers may in

The US lawsuit is not the first action across the Atlantic. US District Judge Jeffrey White ruled that plaintiffs could go ahead with a class action lawsuit against the company.

Additionally, the Consumer Financial Protection Bureau (CFPB) have also hinted at their own opposition to this policy. In a CFPB Issue Spotlight report the agency said that Apple’s NFC policy “ultimately eliminates the possibility of consumer choice in tap-to-pay on Apple devices."

In the most recent case, the lawsuit states, “Apple Wallet is the only app on the iPhone that can use NFC to facilitate tap-to-pay. While Apple actively encourages banks, merchants, and other parties to participate in Apple Wallet, Apple simultaneously exerts its smartphone monopoly to block these same partners from developing better payment products and services for iPhone users.”

In the case of NFCs specifically, while Apple is likely to put up a fight as they did in Europe, there doesn’t seem to be an argument for maintaining a monopoly over the use of these chips on their phones. It’s hard to say if they will win or lose the suit, but it may end in an agreement like the one in Europe.


Comments: (1)

Hitesh Thakkar Technology Evangelist (Financial Technology) at SME - Fintech startups (APAC and Africa)

NFC stickers are common for Tap and Pay payment scenario and it can further extended as wearables in the form of rings, lockets, bracelets and many more form factor to explore - it depends on banks and fintech to be little adventuerous to show up big daddy Apple.


This content is contributed or sourced from third parties but has been subject to Finextra editorial review.