NFC technology for instant payments

ECONOMY/ GOVERNANCE

• GS-3: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment. 
• GS-3: Science and Technology- developments and their applications and effects in everyday life.

NFC technology for instant payments

Context: Google Pay has recently launched a new feature in India, ‘Tap to pay for UPI’, in collaboration with Pine Labs. 

• The feature makes use of Near Field Communication (NFC) technology. 
• Till now, Tap to Pay was only available for cards.

What is NFC and how does it work?

• NFC is a short-range wireless connectivity technology that allows NFC-enabled devices to communicate with each other and transfer information quickly and easily with a single touch — whether to pay bills, exchange business cards, download coupons, or share a document.
• NFC transmits data through electromagnetic radio fields, to enable communication between two devices. 

• Both devices must contain NFC chips, as transactions take place within a very short distance. 
• NFC-enabled devices must be either physically touching or within a few centimetres from each other for data transfer to occur.

How will this technology work with the recently launched feature, ‘Tap to pay for UPI’?

• Google Pay has been the first among UPI apps to bring the Tap to Pay feature working on POS terminals. 
• It will allow users with UPI accounts configured on Google Pay to make payments just by tapping their NFC-enabled Android smartphones on any Pine Labs Android POS terminal. 
• Once users tap their phones on the POS terminal, it will automatically open the Google pay app with the payment amount pre-filled. 
• Users can then verify the amount and merchant name and authenticate the payment, using their UPI PIN. They will be notified once the payment is successful.
• The process is much faster compared to scanning a QR code or entering the UPI-linked mobile number which has been the conventional way till now.

Are other companies using NFC tech for payments using smartphones?

• In February 2022, Apple introduced Tap to Pay on the iPhone. It will allow merchants across the U.S. to use their iPhones to accept Apple Pay, contactless credit and debit cards, and other digital wallets through a tap to their iPhone without the need for any additional hardware or payment terminal.
• At checkout, the customer just needs to hold their iPhone or Apple Watch to pay with Apple Pay, their contactless credit or debit card, or other digital wallet near the merchant’s iPhone to complete the payment using NFC technology, Apple said in a release earlier.

What are the other applications of NFC technology?

• It is used in contactless banking cards to perform money transactions or to generate contact-less tickets for public transport. 
• Contactless cards and readers use NFC in several applications from securing networks and buildings to monitoring inventory and sales, preventing auto theft, keeping tabs on library books, and running unmanned toll booths, according to investopedia.
• NFC is behind the cards that we wave over card readers in subway turnstiles and on buses to check tickets. 
• It is present in speakers, household appliances, and other electronic devices that we monitor and control through our smartphones. 
• It also has an application in healthcare, to monitor patient stats through NFC-enabled wristbands. NFC is used in wireless charging too.

How safe is this technology?

• NFC technology is designed for an operation between devices within a few centimetres from each other. 
• This makes it difficult for attackers to record the communication between the devices compared to other wireless technologies which have a working distance of several metres.
• The user of the NFC-enabled device determines by the touch gesture which entity the NFC communication should take place with, making it more difficult for the attacker to get connected. 
• The security level of the NFC communication is by default higher compared to other wireless communication protocols. 
• The NFC Forum has also added Peer to Peer communication which is a mechanism to cipher all exchanged data to avoid external interpretation of recorded communication. 
• Since the receiving device reads your data the instant you send it, NFCs also reduce the chance of human error.

Where does it stand in comparison to other wireless technologies?

• There are other wireless technologies available which are replacing cable-based connections. 
• The IrDa technology is a short range (a few metres) connection based on the exchange of data over infrared light where the two communication devices must be positioned within a line of sight. 
• Today, this technology is mainly used for remote control devices. 
• For larger data communication with computer devices this technology was replaced by Bluetooth or WiFi connections.
• However, for these technologies’ receiver devices need their own power supply due to the larger working distance. Therefore, the receiving device cannot be powered by the radiofrequency (RF) field like in NFC, the NFC forum highlighted. A
• nother consequence of the larger working distance is the need for the user to configure their device and to pair them together for communication. Connection cannot be initiated by a simple touch gesture like in NFC.

Connecting the dots:

• UPI 123
• E-RUPI
• E-RUPI & Governance