Near Field Communication (NFC) Definition (2024)

What Is Near-Field Communication (NFC)?

Near-field communication (NFC) is a short-range wireless technology that makes your smartphone, tablet, wearables, payment cards, and other devices even smarter. Near-field communication is the ultimate technology solution for connectivity.

With NFC, you can transfer information between devices quickly and easily with a single touch—whether paying bills, exchanging business cards, downloading coupons, or sharing a research paper.

Understanding Near-Field Communication (NFC)

Near-field communication transmits data through electromagnetic radio fields to enable two devices to communicate with each other. To work, 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 centimeters of each other for data transfer to occur.

Because the receiving device reads your data the instant you send it, near-field communications (NFCs) greatly reduce the chance of human error. Rest assured, for example, that you cannot purchase something unknowingly because of a pocket-dial or by walking past a location that's embedded with an NFC chip (called a "smart poster"). With near-field communication, you must perform an action intentionally.

In fact, even after NFC technology becomes universal, users may still need to carry a backup payment method; you cannot do much of anything with a device whose battery is drained. Whether this would be a permanent downside to NFC technology, however, remains to be seen.

How Does Near-Field Communication Technology Work?

NFC technology works by combining four key elements: an NFC microchip within a device, which acts as an antenna and receiver; a reader/writer that scans and allows NFC devices to access data; an NFC software application on the device that can use data received by the NFC chip; and an information or communications service provider (ISP) that manages all device communications that occur through the ISP.

NFC is an extension of RFID technology, which relies on radio waves to track goods, supplies, and merchandise. NFC replaces RFID chips with microchips that have the ability to store and encrypt information. While RFID devices are passive and so lack the ability to access information, NFC-enabled devices do.

For example, you can pay for purchases using NFC-enabled debit and credit cards. When you tap your card on an NFC-compliant payment terminal, data is transmitted between your card and the payment processing system to complete the transaction.

An NFC-enabled device can operate under three different modes: reader/writer mode, peer-to-peer mode, and card emulation mode.

Reader/Write Mode

A reader/writer is an NFC-enabled device that manages and coordinates information sent between and received by two or more NFC devices and a handful of other devices that do not yet feature NFC technology. Examples of reader/writers include point-of-sale (POS) systems, cell phones, tablets, and RFID-enabled cards. In reader/writer mode, NFC-enabled devices communicate and exchange data based on instructions from the reader/writer.

Peer-to-Peer Mode

This P2P mode enables two NFC-enabled devices to exchange information directly. For example, a peer-to-peer device may exchange data with an RFID-enabled device or some other type of NFC device without the assistance of a reader/writer.

Card Emulation Mode

In this mode, an NFC-enabled device functions as an NFC payment card or virtual credit/debit card. When an NFC-enabled device is activated in this mode, it emulates a payment card or other physical card in card readers, magnetic-stripe readers, and contactless card readers used to make payments directly from your mobile device.

History of NFC

Perhaps near-field communication is best known as the technology that lets consumers pay retailers and each other with their cell phones. NFC drives payment services like Google Wallet (NASDAQ: GOOG) and Apple Pay (NASDAQ: AAPL), for example. Although NFC is not currently present in the Amazon Echo (NASDAQ: AMZN), this is a good example of where near-field communications could be useful. Take wanting to tap-to-pay for a pizza (or anything) that you just ordered through the Echo, for example.

Near-field communication technology is rooted in radio-frequency identification (RFID), which has been used for decades by retailers to tag and track products within stores. Near-field communication technology began to gain steam in 2004 when Nokia (NYSE: NOK), Philips (NYSE: PHG), and Sony (NYSE: SNE) banded together to form the NFC Forum, a nonprofit organization that's committed to bringing the convenience of NFC technology to all aspects of life. In 2006, the Forum formally outlined the architecture for NFC technology, whose specifications continue to provide a road map for all interested parties to create powerful new consumer-driven products.

Nokia released the first NFC-enabled phone in 2007, and by 2010, the telecommunications sector had launched more than 100 NFC pilot projects. In 2017, New York City's Metropolitan Transit Authority (MTA) phased in a system that enables riders to pay their subway fares with NFC technology; and the rest, as they say, "is history."

Benefits of NFC

There are several benefits of deploying NFC technology. These include :

Convenience

NFC-enabled devices can replace any card or cash that can make a transaction. Because NFC-enabled devices can store multiple credit cards, for example, you do not need to carry all of them in your purse or wallet; instead, you can pay for purchases by accessing your virtual wallet on your NFC-enabled device.

Security

NFC uses 128-bit or higher encryption to guarantee security and privacy of transactions. Because NFC uses tokenization instead of storing credit card information, for example, no retailer can see your credit card number.

Sharing

Sharing content, goods, and money with friends and family is easier when you grant them access to your NFC-enabled device. For example, if you send a file to an NFC-enabled device with peer-to-peer sharing enabled, the file will be sent immediately.

Targeted & Context-Specific Advertising

NFC technology can be used by advertisers to deliver targeted ads to consumers' NFC-enabled devices. When consumers tap an ad displayed on a device, an advertisem*nt can be customized to that person's interests, location, or other personal information.

NFC Drawbacks and Security Risks

Although NFC technology offers many advantages, it also has some drawbacks and potential risks. These incliude :

Power Constraints

Because NFC-enabled devices rely on battery power, they must be charged periodically. This could result in users forgetting to charge their devices before placing or receiving payment for a purchase. And if a device runs out of power during a transaction, the transaction may be interrupted or the transaction may be incomplete or unsuccessful.

Security Concerns

When NFC operates in a peer-to-peer mode and because NFC-enabled devices store personal information, these devices are vulnerable to security breaches, including cybercrime and digital pickpocketing.

Hackers and cyber criminals can try to access NFC-enabled devices. They may develop malicious software that can steal confidential information from these devices. Furthermore, hackers can create tokens that mimic an NFC-enabled device and gain access to this sensitive information.

Digital Pickpocketing

One of the primary uses for NFC technology today is pay-by-phone. Because NFC-enabled phones are used frequently to make payments, digital pickpockets could use these programs to steal credit card information from unsuspecting customers by intercepting payment information.

Although cybercrime and digital pickpocketing are major vulnerabilities of NFC technology, there are steps you can take to protect yourself. First, make sure that the NFC-enabled devices you carry have the latest security features including 128-bit encryption and two-factor authentication. If you lose a device or suspect it has been compromised, immediately change your passwords and disable all sharing and peer-to-peer sharing features.

NFC: Beyond the Payment Process

With its ever-expanding boundaries, near-field communications have a wide variety of uses beyond simplifying and accelerating the payment process. Today, hundreds of millions of contactless cards and readers worldwide use NFC technology in myriad applications—from securing networks and buildings to monitoring inventory and sales, preventing auto theft, keeping tabs on library books, and running unmanned toll booths.

NFC is behind the cards that we wave over card readers in subway turnstiles and on buses. It is present in speakers, household appliances, and other electronic devices that we monitor and control through our smartphones. With just a touch, NFC can also set up WiFi and Bluetooth devices throughout our homes.

NFCs Offer Near- and Long-Term Solutions

Near-field communications are proving useful in numerous industries and have far-reaching implications.

Healthcare

• Monitoring Patient Stats: NFC opens up new possibilities for home monitoring, as NFC-enabled wristbands can be configured to track patients' vital signs. The patient taps the wristband on a smartphone or tablet, and her medical data is transmitted to the doctor’s office, where a medical professional can check it. With their simple instructions, “just touch,” NFC-enabled devices could let patients of every age monitor their health status autonomously.
• Patient Care-Management: NFC in the hospital setting lets medical staff track where people are, and who’s done what. Staff can know, in real-time, where a patient is, when the nurse last visited, or what treatment a doctor just administered. NFC-enabled wristbands can replace patients' traditional hospital identification bracelets and can be updated with real-time information, such as when a medication was last given, or which procedure needs to be performed when.

Airlines

In 2012, Japan Airlines (OTCMKTS: JAPSY) became the first commercial airline worldwide to allow passengers to tap standard NFC phones to pass through boarding gates in lieu of paper boarding passes. The customer experience in airports that use NFC technology is enhanced significantly, as NFC can shorten the boarding of a 450-person plane to just 15 minutes—a process that normally takes 40 minutes without the use of NFC.

Hospitality, Travel, and Leisure

In the hospitality industry, a hotel may manage building and room access centrally in real-time, without the need for physical delivery of key cards. Instead, you just hold your phone up to the door lock. Using NFC technology, a hotel can send access rights to a guest's room directly to his or her mobile device in advance of their arrival. An NFC hospitality application can include other functions, too, such as booking a room and skipping the check-in phase.

The Bottom Line

NFC, or near-field communication, is a type of wireless technology that allows devices to exchange data over short distances. It is commonly used for contactless payment systems, such as mobile payment apps like Apple Pay and Google Pay, as well as for access control systems, like keyless entry to buildings or hotel rooms. NFC technology is also often used in marketing, allowing businesses to provide customers with information or offers through their NFC-enabled smartphones.

The technology operates at a low-power frequency and is not considered to be harmful to human health. When using a smartphone or tablet, NFC is as safe as any other wireless technology such as WiFi or Bluetooth. However, enabling NFC can drain your battery, and skillful hackers may be able to hack your device or "digital pickpocket" you from close range. As a result, it is often smart to keep the NFC feature turned off while it is not needed.