Chip and PIN: A New Direction for NFC

aNewDomain.net — With credit card companies now pushing for chip and PIN, NFC could be everywhere.

With Apple deciding not to support NFC (near field communication), the conventional wisdom in tech press is that NFC is dead, doomed to lose to Apple’s iBeacon. The thought being that with low-energy Bluetooth and TouchID, Apple is poised to dominate the mobile payment space and replace your wallet with an iPhone. NFC, which has been supported in Android for years, and most conspicuously by Google Wallet, will then fade away. In the last week, though, something has changed that might mean all the conventional wisdom is wrong.

If you ask people how often they see a NFC-enabled credit card terminal in their daily life, they probably couldn’t tell you. In fact, the largest NFC-based system, MasterCard’s PayPass can be found in hundreds of thousands of businesses around the world now. If you haven’t come across one, it points to the enormity of the task of upgrading point-of-sale terminals around the world. Think about that when you consider what Apple would have to do to be anything but a niche player in mobile payments.

Businesses, ranging from Walmart to the convenience store down the street, have had little incentive to make any changes. They can take credit cards now, and that covers their needs well. While some have postulated that Apple has leverage with its collection of credit cards, I find this to be almost no leverage at all. Apple has credit cards that already work perfectly fine with the existing infrastructure. That’s not going to be enough for point-of-sale terminals to be upgraded.

Image credit: Wikimedia Commons

Enter Chip and PIN. Chip and PIN is a new kind of credit card that replaces the swipe and sign-style credit cards we use today. Instead of signing with your name, you will need to enter a PIN. With credit card fraud from Target in the news, Visa, MasterCard, and American Express have announced that businesses that do not accept Chip and PIN for in-person transactions after October 2015, will be held liable for fraud.

Also in the announcement was this nugget:

So the EMV standard that we are moving toward isn’t limited to chip and PIN cards, it also includes things like contactless payments, where you can tap the card against the reader, all with the same level of security.”

In other words, the new terminals will be NFC-enabled.

This is huge for NFC. With a huge incentive for point-of-sale terminals to be upgraded before October 2015, the rollouts are going to begin now. The NFC-enabled terminals that businesses will be upgrading to are already designed and built. An alternate system that is Apple-centric isn’t going to happen between now and then, because businesses will be too busy worrying about avoiding liability for fraud.

On the customer side, buyers will have to change the way they pay. It’s hard to break the habit of just whipping out your credit card instead of your NFC-enabled phone, but with the new requirement of entering a PIN number, NFC mobile apps like Google Wallet won’t seem that strange. Not only are we on the cusp of a massive upgrade in point-of-sale terminals, we’re about to see a retraining on how we use credit cards. NFC is about to become the most-widely-deployed mobile payment system in the world.

The problem with Apple dominating mobile payments was always that Apple doesn’t control the payment gateway. The credit card companies do and they’re about to put an NFC terminal everywhere. NFC is far from dead, in fact, it’s only getting started.

For aNewDomain.net, I’m Shane Brady.

Based in Kansas City, Shane P. Brady is a senior contributor at aNewDomain.net. He’s a deep tech reviewer, and you can read his articles at this link. Contact him at Shane@aNewDomain.net.