How does NFC payment work?

In order to pay via NFC, you only need to hold your smartphone or NFC credit card to a POS terminal. Then, the encrypted payment information are transferred from your smartphone or NFC credit card to the POS terminal. This way, small sums can be paid without entering a PIN code or signing a receipt. Thus, the payment process is easier and more convenient than ever before. So much for theory – in the following we explain which options are currently available to pay via NFC.

Which options are currently available to pay via NFC?

There are basically two different ways to pay with NFC. Firstly, the NFC-capable bank card can be held in front of the reader of the POS terminal. There is no need to insert the card into POS terminal. On the other hand, payment can be made with a smartphone. Here too, the smartphone is held at the corresponding NFC contact point of the payment terminal. For Android users there is Google Pay and for iPhone users Apple Pay. Google / Apple Pay offer the clear advantage that the credit card (in future also the Girocard) does not actually have to be taken along. Most people nowadays always have their smartphone with them anyway, so it is very practical to be able to pay with it through an app.

Besides the smartphone, there is also the possibility to pay via Smartwatch, which makes the payment process final, fast and simple. But those who want to pay cashless by Smartwatch have to be careful: Certain payment services only work on certain Smartwatch models. Commonly supported models are Google Pay, Apple Pay, Samsung Pay, Garmin Pay and Fitbit Pay. Of course, the support of the banks is also important here.

Several banks and credit institutions are also replacing the current girocards (formerly EC cards) and credit cards with an NFC-enabled version. With these NFC-cards it is still possible to pay as usual or you can hold them in front of the reader at the cash desk. In principle, this is exactly the same process as paying via Google/Apple Pay, except that no card is required for payment and the customer can have a better overview of his or her spending on the smartphone.

Pay with Apple Pay

iPhone

Since iPhone 6, an NFC chip has been built into the iPhone, which makes it possible to pay through Apple Pay at a corresponding NFC payment terminal. Unfortunately, a credit card is still often required at present to link it to the iPhone. If you don't have a credit card, you will have to take a detour, such as a free account with a financial service provider like N26 or Comdirekt. A credit card can be added to the iPhone very easily. To do so, the card number or directly the whole card by photo must be added. After the card has been added, the iPhone only needs to be held against the payment terminal. Many customers would also like a link to Paypal. Also this is currently not possible.

Apple Watch

Apple Pay works on every Apple Watch up to the 4th generation. During payment, specially generated card numbers and transaction codes, so-called tokens, are used, so that no security gaps are created by the additional terminal device. This means that no credit card data ends up on the watch or the servers.

Pay with Google Pay

Google Pay is available with every Android smartphone. Besides mainly Visa and Mastercards, almost no giro cards are supported. But unlike Apple Pay, Google Pay allows you to link to the PayPal account. With this little detour it is possible to pay with the smartphone via NFC and to debit the amount directly from the account with the PayPal - Girocard link.

Smartwatch and Google Pay

Compared to the Apple Watch, it looks a bit more complicated when paying with Smartwatches from other manufacturers. If payment transactions are to be made with such Smartphones, they definitely require an NFC chip in the Smartwatch and the Smartwatch operating system Wear OS (Android). This is used by LG Watch Sport, Huawei Watch and many other models.

With a Smartwatch from Samsung it looks different again: Here, an own payment service, Samsung Pay, is used. However, this is not yet available in Germany.

It can therefore be stated that with Smartwatches that do not come from Apple, exactly what has to be taken into account with regard to the operating system and the exact hardware and software properties if payment transactions are to be made with the Smartwatch. Furthermore, it must be ensured that the desired banks and credit institutions generally support this service.

Payment with NFC-EC / credit card

Currently, almost all modern EC and credit cards are equipped with an NFC chip. A small wave symbol pointing to the right symbolises that contactless payment can be made with the bank card. To do this, the card only has to be held at the corresponding NFC contact point of the payment terminal.

Summarized:

• For the use of and Google & Apple Pay there are only a few prerequisites to be fulfilled by the customer (NFC-capable smartphone, linking of the own card).
• NFC credit cards are the simplest way of contactless payment

Further information

• Wikipedia entry on Mastercard
• Wikipedia entry on VISA Inc.
• Wikipedia entry on Apple Pay
• Google Pay