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NFC For Beginners

Near Field Communications (NFC) hit the news again with the launch of the Apple iPhone 6 and Apple Pay. While NFC has been in use for two decades, many believe that Apple has added the momentum necessary to make it mainstream. It is probably time for you to understand what NFC is!

NFC communication works using magnetic induction: a reader emits a small electric current which bridges the physical space between the devices at a distance of up to 10cm although practically many devices require closer proximity. Devices are usually a smart card, fob or phone but could be anything that the chip or tag can be attached to.

A passive NFC chip or tag, contains information that other devices can read. Contactless smart cards were first used for electronic ticketing in 1995 in Seoul, South Korea. They have a wide variety of applications including building access, loyalty initiatives, mass transit systems and identification cards such as driving licenses. Passive NFC tags use the energy from the reader to encode their response while active NFC tags have their own power source and respond to the reader using energy from their device. Many card payment terminals have been NFC enabled. Active NFC devices can read and exchange information securely and can alter the information on the NFC tag if authorized to make changes.

In 2012, Apple received a patent for an NFC-based mobile ticketing service called iTravel. This technology would let travelers use their iPhones as wireless boarding passes, and the patent was one of the earlier clues that Apple was investigating uses of NFC in its devices. The recently launched Apple Pay uses NFC for the point of sale transactions. Apple Pay generates a single use token expires with each transaction, preventing card cloning and identity theft. The use of biometric authentication with the TouchID further improves the security which is important when you consider that 4.5 million smart- phones were stolen in the US last year.

Apple’s singular focus on a proprietary payments platform has broadened and reinvigorated the NFC conversation. NFC is a technological opportunity far beyond Apple Pay, it can provide innovation beyond payments in identity, communications, marketing and security. Banks and credit unions will not be able to use the NFC capabilities of Apple to identify their customers or share information. These capabilities can all be implemented by banks and credit unions outside of the Apple ecosystem.


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