Contactless payments are no longer exotic and have become a part of everyday life. The ability to make purchases with a single touch, paying with a smartphone or smart watch, appeared thanks to NFC technology.

In the near term this format of payments may oust not only cash, but also classic bank cards. The RBC material provides a history of the emergence and development of this technology.

What NFC is and where it is used

Near field communication (NFC) – is a wireless data transmission technology. It allows exchange of information between the devices over a distance of not more than 10 cm. Based on radio frequency exchange it does not require Internet to use NFC: the devices are connected automatically as soon as they appear within a ten-centimeter range. When a person waves the card to the commercial equipment at a short distance, the signal from the carrier is read and the payment is made.

The first ever widespread use of contactless payment was recorded in South Korea in 1995, where the Seoul Bus Transportation Association issued a UPass card for passengers. It allowed making contactless payments for trips. In 1997 Mobil introduced the contactless payment technology enabling the car owners to save their time by paying for fuel without queuing at gas stations.

The first international standard for contactless payment by bank cards was jointly developed by Europay, Mastercard and Visa companies in 1996. Many years may pass before the standard is introduced in the United States, but it is this step that will result in a large-scale transition of merchants to payment terminals with contactless NFC technology.

In 2004, Sony, Nokia and NXP Semiconductors set the NFC Forum, a non-profit association with a mission to spread the technology on consumer electronics, mobile devices and computers. In the same year, contactless bank cards appeared in the United States, and four years later, Mastercard, Visa and American Express launched not only debit cards, but also credit contactless cards.

Two years later, the first ever mobile device with NFC functionality appeared on sale – the Nokia 6131. Soon contactless payments came to Russia. In 2013, contactless payment was introduced in the Moscow metro, at Aeroexpress turnstiles and on some bus routes in the Moscow region.

The Universiade in Kazan, held in the same 2013, had a significant impact on the development of contactless payments. Especially for it, multiservice contactless cards were issued, which made it possible to go to sports facilities, travel by transport and buy tickets for competitions.

Why smartphone managed to replace wallet

Tech giants, perhaps more than anything else, contributed to the proliferation of NFC payments. They logically reasoned that sometimes a person forgets his/her wallet at home, while the smartphone is always in his/her pocket. What if you can pay for purchases simply by keeping your phone against the terminal? With this idea in mind, in 2011 Google launched Google Wallet – a real electronic wallet that allows you to give up a plastic card for a phone. In 2015, it was supplemented with the Android Pay service, and in 2018, both systems were replaced by Google Pay.

In 2014, Apple responded to Google, developing the Apple Pay contactless payment system. A year later, Samsung had an analogue, while the possibilities of Samsung Pay were immediately wider: the service supported not only NFC payments, but also payment via terminals designed for cards with a magnetic stripe. This is how the leading players in the gadget market divided the market of Europe, the USA and Russia.

Finally, in 2015, the EMV technology (Europay + Mastercard + Visa) was introduced – an international standard for operations with bank cards with a chip. The new standard is intended to significantly improve the level of transaction security. The emergence of such technology prompts hundreds of thousands of companies around the world to switch to terminals with NFC payments, since now the responsibility for possible leakage of customer data rests with the participant in the payment chain who has not implemented EMV.

The service is easy to configure: the card number is not stored either on the smartphone or on the servers of payment systems. When paying, it is enough to bring your phone or watch to the payment terminal. You do not need to enter a PIN code. Fantasy became a reality after the introduction of EMV – the situation “I forgot my card, I can’t pay” disappeared, and smartphones and other wearable devices really replaced the wallet.

There is also a downside: a small number of shops, whose equipment supports NFC. But this is a matter of time. In recent years, both banks and retail chains have been actively developing infrastructure for contactless payments.

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