NFC payments have become one of the most common methods of conducting financial transactions. These NFC mobile payments facilitate consumers to make purchases using their smartphones, smartwatches, or contactless cards in an effortless and safe manner. As the usage increases, both businesses and consumers need to understand the workings and advantages of NFC contactless payments, as the demand for these payments increases.
NFC mobile payments are gradually gaining traction in India, led by innovations like UPI Tap & Pay introduced by NPCI. While UPI is predominantly powered by QR codes and Virtual Payment Addresses (VPAs), the NFC-based ‘tap and pay’ feature adds an extra layer of speed and convenience. Early adoption is visible in metros where retailers are beginning to enable contactless payments, marking a new phase in India’s digital commerce journey.
This article addresses such questions as: What is NFC payment? How does NFC payment work? And why NFC payment in India is the future.
What is NFC? (Knowing NFC Technology)
NFC refers to Near Field Communication. It is a short-range wireless technology that allows two devices to exchange data when they are a few centimetres apart. This technology supports many applications like NFC tap and pay, data transfer, and device sharing.
What are NFC Payments?
NFC payments are completed by tapping an enabled device, like a smartphone or contactless card, against an NFC-compatible point-of-sale (POS) terminal. This method, commonly referred to as NFC tap and pay, makes payments faster and more secure since no physical contact is necessary.
How Do NFC Payments Work?
When a user initiates an NFC-based payment, the following steps occur:
- Device Activation: The user unlocks their phone and uses payment apps like Google Pay or Apple Pay to complete the transaction via NFC.
- Device Closeness: The user brings the device close to the NFC payment terminal.
- Data Exchange: Encrypted payment information is exchanged between the devices.
- Payment Completion: The device processes the payment immediately, usually within seconds.
This method guarantees a secure, efficient, and streamlined transaction experience.
NFC Payment Methods and Devices:
Multiple types of devices support NFC payments, including:
- Smartphones: Most of the Android and IOS Devices.
- Smartwatches: Apple Watches and Samsung Galaxy Watches.
- Contactless Cards: Debit and Credit Cards with the NFC symbol.
These devices allow users to perform NFC mobile payments with convenience.
How to Use NFC Mobile Payments?
To utilise NFC mobile payments:
- Check Device Compatibility: Verify that your device is NFC-enabled.
- Set Up an NFC Wallet: Download and set up the required applications, such as Google Pay or Apple Pay.
- Add Payment Methods: Add your credit and/or debit cards to the NFC wallet.
- Make a Payment: To make a payment, unlock your device, launch the wallet application and place the device near the NFC payment terminal.
This method improves the ease of doing transactions with less physical cash or cards.
Benefits of NFC Payments:
- Convenience: Transactions can be done almost instantly.
- Security: Fraud risk is lowered due to encrypted data transmission.
- Hygiene: Less physical contact due to contactless payments.
- Efficiency: Improved customer satisfaction owing to shorter waiting times when checking out. Customers can make transactions effortlessly using only their phones, no physical cards or wallets needed.
These benefits serve both consumers and businesses, making NFC payments more appealing.
Payment Security with NFC Technology and Payments:
Security concern is heavily emphasized with NFC-based payments. Some important features include:
- Tokenization (RBI Mandated) –
- Actual card credentials (PAN, CVV, etc.) are not shared with merchants or payment aggregators. Instead, they are replaced with device-specific or merchant-scoped tokens issued via authorized card networks or issuers.
- Tokenization is allowed for consumer devices (phones, wearables, IoT) across different payment channels (contactless, in-app, QR) with explicit customer consent.
- The token must be uniquely tied to the card, merchant (or token requestor), and the device (“token requestor” concept).
- The registration for a tokenization request must use Additional Factor of Authentication (AFA). The consent cannot be forced (e.g. default-checked box) and must allow the user to choose use-cases and set limits.
- Merchants and payment aggregators cannot store full card credentials. Only the last four digits, issuer name, and network may be stored (with customer consent) for identification/tracing purposes.
- Encryption & Data Protection –
- Every NFC or card-based transaction must be encrypted end-to-end, ensuring that sensitive data cannot be intercepted during transmission.
- Tokens and related secure information can only be stored in highly secure environments managed by card issuers or card networks, never by merchants or third parties.
- Additional Factor of Authentication (AFA) –
- The RBI requires at least one additional authentication factor (OTP, PIN, biometric, hardware/software token, etc.) for digital payment instructions beyond the first factor.
- However, exemptions apply to improve usability:
- Contactless card present (PoS) transactions up to ₹5,000 may be exempt from AFA.
- Small-value offline digital payments (e.g. offline UPI, wallets) may also have exemptions (e.g. up to ₹500).
- E-mandate recurring transactions beyond the first can be exempted under limits (e.g. up to ₹1,00,000 for certain categories) under the draft framework.
- In the draft “Framework on Alternative Authentication Mechanisms,” RBI proposes that the first factor and the additional factor must come from different categories (knowledge, possession, inherence).
- Issuers may adopt a risk-based approach to determine the strength or type of AFA depending on the user, transaction value, channel, etc.
- Real-time alerts to customers for “eligible digital payment transactions” are also mandated under the draft framework.
- Prohibition on Storing Sensitive Card Data –
- No entity in the payment chain except card issuers and card networks can store full card data. This excludes merchants, payment aggregators, gateways, acquirers from storing PAN, CVV, expiry, etc.
- Token storage by merchants is allowed only if they are PCI DSS compliant (and store the token, not the card data).
- Merchants may retain only last four digits, issuer name and network (for display/identification), and only with user consent.
- Token deletion: Users should have the ability to deactivate or delete tokens associated with a merchant or overall.
These RBI guidelines ensure that NFC payments are fast and convenient without compromising security.
How Can Merchants Implement NFC Payments?
Implementation of NFC contactless payments for merchants can be done by:
- Upgrading POS Systems: Take charge of purchasing new terminals that support NFC.
- Training Staff: Train employees on how to handle NFC payments.
- Promoting the Service: Notify users of the availability of NFC tap and pay features.
India has seen the deployment of about 2.3 million POS terminals as of February 2025, up from under 900,000 two years earlier. UPI QR code deployment surged by 91.5% year-on-year to 657.9 million as of January 2025, highlighting the massive scale of merchant onboarding across the country
For merchants, enabling NFC payments is becoming a baseline expectation for customer satisfaction, operational efficiency, and long-term competitiveness.
In India, while UPI transactions are still dominated by QR codes and Virtual Payment Addresses (VPAs), NPCI’s UPI Tap & Pay initiative marks the early stages of NFC adoption. This ‘tap and pay’ option adds speed and convenience at checkout, and its uptake is expected to grow gradually alongside broader digital payment adoption.
With “invisible payments,” which use sensors to automate transactions, NFC contactless payments will grow globally. In India, smooth NFC payment experiences are being made possible by developments in Government Solutions and UPI Lite.
Conclusion
Digital payment solutions continue to drive advancements across Transaction Banking, Retail Payments, and Government Solutions. With a robust infrastructure processing millions of transactions monthly, it enables the adoption and implementation of innovations like NFC payments and other advanced digital payment solutions.
FAQs?
1. How can I set up NFC payments on my mobile?
Enable NFC in settings, download an NFC wallet (e.g., Google Pay), add your card, and verify it.
2. What is the difference between NFC contactless payments and QR code payments?
NFC uses proximity-based wireless tech; QR payment needs scanning a code. NFC is faster and more seamless.
3. Are there any limits for NFC tap and pay transactions?
Yes, in India, tap-and-pay is limited to Rs 5,000 per transaction (RBI limit as of 2024).
4. Is it safe to store my card in an NFC wallet?
Yes, it uses tokenization, encryption, and biometric/PIN authentication for high security.
