NFC and EMV both refer to relatively new terms in payments technology that, together, have changed the landscape of accepting credit and debit cards for merchants and consumers alike. But what are they and what is the difference between them?
They have fundamentally changed how a cardholder is able to use their cards to pay for a transaction in person and how the card communicates with the terminal to process the transaction. The important distinction to be made is that EMV (which stands for EuroPay, Mastercard, and Visa - the three companies who founded it) refers to a new security standard that is exclusive to the payments industry and the related infrastructure required to process EMV transactions, separate from the previous magstripe standard and its related, and quickly becoming outdated, infrastructure. Whereas NFC (which stands for "Near Field Communication") refers to the technology that is not exclusive to the payments industry that allows two devices to communicate with each other by simply being in close proximity.
What is EMV?
Cards that use EMV technology, or "chip cards," have a small computer chip implanted on the card that communicates with the terminals to ensure you are not a fraudster. Devices like phones and wearable are able to emulate an EMV chip card and can be used to complete an EMV payment as well. With the recent liability shift in 2015, merchants can now be responsible for some types of fraud if they do not process a chip card with an EMV enabled processing device. These types of transactions are commonly referred to as “Chip & Pin” or “Chip & Signature” because cardholders are required to insert the chip on the card into the terminal, and then enter their pin or sign the receipt to complete the transaction. EMV cards, which are much more secure, are steadily overtaking the standard magstripe cards as the new worldwide standard.
What is NFC?
NFC is a technology used in a multitude of contexts from product scanners and key fobs to file sharing and children's toys. If a credit or debit card or NFC-enabled device is equipped with NFC, then they are able to pay for a purchase by simply holding their card close to the terminal, essentially facilitating contactless payments. Even though the card needs to be within about an inch and half of the terminal in order for the communication to occur, NFC payments are also commonly referred to as "Tap & Pay," "Tap & Go," or simply "Tap," because the user can simply “tap” their card on the terminal's surface to complete the transaction. Mobile and wearable payment technology, such as Apple Pay and Android Pay, also rely on NFC technology to complete transactions.
Are the Transactions Secure?
EMV was introduced to add additional security when processing payments to protect both the merchants and the cardholders and limit their exposure to fraud. When EMV was introduced around the world, it had a significant impact on card-present fraud. Each time you process an EMV transaction, the payment creates a unique transaction ID that cannot be replicated, and the cards themselves are also more difficult for fraudsters to replicate compared to magnetic stripe cards.
If a customer makes a purchase using NFC technology, then both Visa and Mastercard require the customer to hold their card (or device) close to the card reader for the transaction to be processed. Each NFC transaction also includes a unique security code to help protect against fraud. Unlike Chip & Pin or EMV transactions, many NFC transactions have a limit of about $100 in case the card is stolen, and if the transaction amount is above that amount, then customers will need to insert their card into the terminal and enter a pin or signature for the transaction to go through.
How do you Accept EMV and NFC Payments?
Many of the newer terminals can accept both Tap & Pay as well as Chip & Pin payments from consumers. As a business owner, you’ll most likely find that many of your customers have credit and debit cards, along with their mobile wallet options, that they want to use to pay for a purchase. As a retailer, you can also be liable for consumer fraud if you have not upgraded your terminals to be able to accept EMV payments and you process a fraudulent transaction using an EMV enabled card.
The distribution of EMV and NFC cards will continue to increase in the next few years as issuing banks phase out magnetic stripe cards and issue more EMV and NFC enabled cards. It’s important that you are aware of these new payment technologies and how they affect your business and the way you accept payments.