Tap to Pay 101: How NFC Payments Work for Modern Retail
Pandemic Payment Paradigm Shift: COVID-19 revolutionized payment methods, encouraging greater adoption of contactless and digital payments to reduce physical interactions and bolster safety.
Contactless Craze Takes Off: Consumers increasingly embraced contactless payments during the pandemic, enjoying the convenience and ease of use which has led to sustained popularity beyond the crisis.
Apps and Cards: Stars of Quarantine: Payment apps and credit/debit cards became essential during lockdowns, reducing dependency on cash and facilitating seamless transactions while adhering to social distancing norms.
Digital Wallets Win Big: Digital wallet usage surged as they offered a secure and efficient alternative to traditional cards and cash, reshaping consumer behavior towards a cashless preference.
Cash's Comeback? Not Likely!: The future seems cashless as the changes in payment habits during COVID-19 have set lasting trends, with digital solutions proving more convenient and hygienic.
It might feel like a lifetime ago, but COVID-19 sparked a major shift in how we pay.
Practically overnight, tapping to pay went from a nice-to-have to a must-have. This payment method was highly valued for its speed, convenience, and above all, safety.
At first, not everyone was convinced. In 2020, only 16% of consumers viewed contactless payments as the most secure option.
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Today, the story’s completely different.
When confidence went up, adoption soared.
In fact, Juniper Research projects that the value of contactless payment transactions will grow by 113% over the next five years.
If you’re a retailer, now’s the time to catch up and start giving customers the payment option they want.
This guide will show you how.
What Is NFC, and How Does It Power Payments?
NFC, or Near Field Communication, is the tech behind tap-to-pay.
Shoppers tap an NFC-enabled card, smartphone, or smartwatch on a payment terminal, and the payment goes through in seconds.
NFC is a secure upgrade to old-school RFID. Both run on the same frequency (13.56 MHz) used in key cards and access badges.
Unlike basic RFID, however, NFC has encryption and authentication, making it secure enough for retail point-of-sale payments.
People also lump EMV and NFC together because both support secure, authenticated payments. While both are encrypted to block payment fraud, they don’t work the same way.
EMV refers to chip-based card payments that require the card to be inserted into the reader. NFC, on the other hand, enables faster, contactless payments.
The good news is that you don’t have to rebuild your payment system to use NFC because most modern terminals already support it out of the box.
But you still need this guide to implement it well, so you can provide this frictionless, future-proof payment option to your customers.
How Do NFC Payments Work, Technically?
Long lines kill sales.
One major way to cut wait times is to process payments quickly and efficiently.
NFC technology helps avoid this bottleneck by improving transaction speed and strengthening payment security. It’s a new(ish) method, but one that has proven effective in the payments industry.
Let’s follow Casaeon, a fictional home tech retailer, to see this process in real-world retail.
Casaeon recently upgraded its POS system to support NFC payments, driven by growing demand for NFC mobile payments and contactless credit and debit cards.
Jordan, a frequent customer, stops by to get a CasaCore 3000, Casaeon’s latest control unit for home automation.
After testing the unit in-store, he heads straight to Counter 1 to pay for the item.
With long lines during peak hours, NFC helps Casaeon deliver a faster, secure checkout flow. Here’s what happened next:
- Payment initiation. Jordan holds his iPhone near Casaeon’s NFC-enabled card reader to pay with Apple Pay. He could’ve also tapped his smartwatch or other payment apps like Google Pay or Samsung Pay.
- Payment data encryption. The phone’s NFC chip transmits secure, short-range radio waves to share payment information with the card reader.
- Payment tokenization. Apple Pay generates a one-time-use token (i.e., a randomized string of numbers) for this transaction only. Casaeon’s POS system never stores or sees his real payment info.
- Payment confirmation. Jordan gets prompted to authenticate the payment with Face ID. Depending on the NFC-enabled device, it could also be a fingerprint, passcode, or whatever biometric method the shopper has set up.
- One-time token routing. Once Jordan authenticates the payment, Casaeon’s POS system sends the tokenized data → to the payment processor → then to Jordan’s bank for approval.
- Bank approval. Jordan’s issuing bank—the one linked to his Apple Pay—receives the tokenized data. The bank confirms it matches his account and approves the payment.
- Sale completion. Casaeon’s staff logs the transaction, prints a receipt, and Jordan walks out with his new CasaCore 3000.
For Casaeon, NFC was the right call: it eased long lines, met demand for contactless payments, and facilitated smoother checkout.
But what worked for Casaeon won’t suit every retailer.
NFC has clear perks, but also a few caveats depending on your setup, customer habits, and payment infrastructure.
So before jumping in, let’s understand the pros and cons of going contactless.
Pros and Cons of NFC for Retailers
NFC payment technology only works because of close proximity. That quick tap or hover is what makes transactions feel effortless, but it can just as easily be a point of friction.
If the device doesn’t get close enough, or the reader isn’t responsive, the transaction fails.
And that’s only part of the picture.
From payment flexibility to hardware costs, there are more perks and pitfalls to consider before committing to this short-range tech.
| Pros | Cons |
|---|---|
| Faster checkout. 85% of contactless transactions wrap up within 10 seconds. This means shorter lines and fewer bottlenecks at the register. | Hardware costs. NFC-enabled POS systems or card readers require upfront investment. This can be challenging for small businesses on tight budgets. |
| Flexible payment methods. Over 2 billion devices already support NFC (expected to be 6.1 billion by 2030), customers expect to tap and go. Accepting mobile devices, watches, and contactless cards means you’re ready for how people already pay. | Learning curve. Staff and customers may require training to get comfortable with tap-to-pay tech. Expect to spend time on quick demos, signage, and answering FAQs, particularly with older shoppers. |
| Secure payments. Tokenization, biometric authentication, and short-range transmission help keep fraudsters out. Contactless transactions account for less than 0.02% of total card fraud. | Compatibility issues. Older POS systems often can’t accept NFC or mobile payments without a hardware upgrade. Example: PayPal launched its Zettle contactless solution, prompting retailers to retire the older “chip & swipe” model. |
After weighing the trade-offs, it all comes down to giving your store speed, flexibility, and security while being smart about costs and setup.
Aside from speed and security, NFC lets you perform customer checkouts anywhere, be it on the floor, at pop-ups, or curbside. This payment flexibility can help deepen customer engagement and boost your long-term operational stability.
Why Retailers Should Care About NFC
Over 80% of shoppers have already tapped to pay with a smartphone or smartwatch. And for many, that fast, contactless experience is now the default.
If your checkout can’t keep up, you risk losing them to a competitor that can.
Below are the shifts in customer expectations that make NFC payment solutions worth your attention.
Checkout speed is now non-negotiable
Customers don’t like lines. NFC payments let them breeze through checkout, increasing satisfaction and reducing cart abandonment.
We were able to cut checkout times in nearly half once we made the switch to NFC.
Our consumers were more than satisfied with this integration since the whole process is so fast. We also had fewer unsuccessful transactions compared to chip-and-PIN.
Younger buyers expect it
Tap-to-pay is now the default.
Modern consumers, especially younger ones, associate the lack of NFC payment systems with outdated operations.
Every young consumer almost expects you to have this if you’re a retailer. By not having NFC, you are basically telling them that you’re not keeping up with the times.
Seconds saved = more sales
Small gains in transaction time can trigger big improvements in throughput.
Take this example: Valor Coffee’s chip-and-PIN setup averaged 23 seconds per guest. Across 400 daily transactions, that added up to over 2.5 hours spent just on payment each day.
After switching fully to NFC, the average dropped to 13 seconds—saving them more than 1 hour daily. The morning rush moved with more consistency, and transaction volume rose by 17%.
The team no longer paused to deal with chip malfunctions or slow card insertions. They have more room to handle conversation, accuracy, and movement behind the bar.
Built-in buyer trust
Thirty-eight percent of respondents ranked NFC contactless payments as the most secure, followed by QR code (28%), contactless card (19%), and cash (15%).
Retailers that tap into NFC see faster checkouts, happier customers, and real gains in sales flow.
The numbers back it up. The stories prove it.
If you’re all in and ready to make tap-to-pay part of your everyday checkout, here’s how to roll it out the smart way.
How to Accept NFC Payments in Your Store
As a business owner, Joosep of Icecartel believes that NFC isn’t the future; it's the present. Follow his lead and take these key steps:
1. Understand what’s needed for NFC payments
Behind that quick tap NFC payments are famous for, there’s actually a coordinated dance of devices and systems at work.
Russell Gilmer, director of operations at Curbstone, a company specializing in secure integrated payments for enterprise retailers, specifies what these are and why they are important:
- First, there’s the NFC-enabled terminal, which must support EMV chip contactless standards and meet strict PCI compliance requirements.
Gilmer explains:
Vendors need to ensure that the terminals they provide are fully certified and receive regular updates to maintain security and functionality.
Doing so means you stay on top of new threats and performance demands.
- Then comes the payment software or payment gateway, which is responsible for processing the tokenized and encrypted data that makes NFC so secure.
Merchants should look for cloud-based platforms that are optimized specifically for this purpose, providing a seamless bridge between the terminal and the processor.
Without the right gateway, even the most advanced hardware can't deliver the speed and security consumers expect.
- The payment processor or acquirer is the third piece of the puzzle.
It verifies NFC tokens, authenticates them, and routes them through the appropriate networks swiftly and without error. It's essential for real-time approvals and ensuring customer trust at checkout.
- But Gilmer adds there’s one more player in the mix that comes from the consumer side: the mobile phone or contactless payment card.
The device must have an embedded NFC chip. If it’s a phone, it needs a compatible wallet app like Apple Pay or Google Pay.
For cards, a built-in contactless chip is a must.
2. Select an NFC-enabled POS system
Now that you know how NFC operates, you can make your first hardware choice: point-of-sale (POS) systems.
POS systems are essential in any retail environment. They process payments, manage inventory, and sync with your customer database.
There are different types, and they come in a variety of shapes and sizes:
When it comes to NFC payments, the POS system needs to be equipped with the right hardware and software to accept contactless transactions from cards and digital wallets.
I don’t want to overwhelm you here, so you can start with two that cover the most retail environments: desktop POS and mobile POS (mPOS).
Desktop POS systems are ideal for fixed checkout counters, while mobile POS systems are perfect for pop-ups, smaller spaces, or other stores that need checkout flexibility.
So, what should you ask a POS vendor before buying an NFC-enabled system?
Let’s start with the most crucial thing:
Business owners should know if the payment device is EMV and PCI-compliant and if the payment processor supports all major wallets (Apple Pay, Google Pay, Android Pay).
Other things to consider:
- Not all POS systems support all payment options by default. Ask which options are already enabled and whether setup or limits apply.
- Some NFC payments can still go through if your internet is down—check if the POS supports offline mode.
- Ask whether the system integrates with your inventory and loyalty tools to avoid managing everything separately.
Looking for the right system? Here are the best POS Systems for retail:
Need something handheld? Check out this list of top-performing mobile POS systems
Once you already have an NFC-ready POS system, here's what to configure before you go live:
- Establish a secure, stable internet connection for the POS
- Check NFC functionality with a real tap-to-pay card or mobile wallet
- Integrate your POS with inventory management and loyalty programs
- Make sure it communicates with your gateway and payment processor smoothly
3. Choose a compatible payment processor
Customers see the POS—but it’s your payment processor that actually moves money into your account.
Payment processors approve, authorize, and settle each transaction behind the scenes.
To support NFC, you can make sure your processor checks a few key boxes:
- NFC compatibility. It should support both tap-to-pay cards and mobile wallets such as Apple Pay, Google Pay, and Samsung Pay.
- Transparent pricing. Verify that the fees are clearly outlined and there are no surprises, especially for contactless transactions.
- Strong support. A responsive account rep can help you troubleshoot, upgrade, or scale as needed.
To ensure compatibility, speak directly with your payment processor’s account rep and explicitly state that you are implementing contactless payments.
This includes payments from both tap-to-pay cards and mobile wallets like Apple Pay, Google Pay, and Samsung Pay, as you want all forms of NFC supported.
Fortunately, virtually every payment processor is capable of handling NFC transactions.
Once you’ve shortlisted a few options, don’t skip the trial run.
Test the whole thing before you commit. Run some test transactions to make sure all goes well.
And check for weird fees. If you’re okay with the setup, then and only then do you go ahead with it.
But before you test, you need to narrow your options down really well. Check out our recommended payment processors to decide for yourself:
4. Create or update your merchant account
A merchant account is a key player in NFC payments. It’s where the money goes after a customer taps their card or phone.
Transactions simply won’t be completed without it.
If you're not sure which provider is best for your needs, POS system and payment processor compatibility are very important.
Seamless integration is critical to avoiding payment issues down the line.
Fortunately, there are platforms like Stax Pay and Square that offer bundled services that combine merchant accounts, POS systems, and payment processing into one ecosystem.
This all-in-one structure makes setup and integration easier and more reliable. It’s ideal for businesses starting from scratch or scaling quickly.
For established brick-and-mortar businesses, update your existing merchant account when adding NFC payment options. Failing to do so can lead to failed transactions or limited functionality.
Some merchants forget this step. Make sure that:
👉 Your contactless payment settings are enabled on your account—it will depend on your provider
👉 Your MCC (Merchant Category Code) supports card-present transactions
👉 You review your interchange rates, as contactless may have different fees
Phillip of CardPaymentOptions likes to add three more points to this sage advice:
- Review the fine print of your merchant agreement. This is the most commonly overlooked step in this process, according to Phillip. Merchants need to confirm that contactless payments will be billed at the same “card-present” rate and not be subject to any higher fees.
- Ask how these new transactions will appear on their daily settlement reports. Clear labeling facilitates accounting and tracking of customer payment preferences over time. It’s also better for your accountant!
- Read the service agreements that may be attached to your POS hardware. They may include extra processing terms, device limits, or early termination clauses.
Consider the following merchant account services if you’re starting from scratch or seriously thinking about a change.
5. Train your staff on NFC checkout flows
Reality check (and by no means, I’m trying to scare you): 70% of digital transformations fail. One reason these major efforts to modernize business through technology fail is poor user adoption.
Make sure your staff is aware of how NFC payments work, and how to assist or reassure customers… especially when something goes sideways.
Ideally, they should be able to troubleshoot common problems, such as:
- Phone cases that interfere with the NFC signal
- Damaged or incompatible contactless cards
- A frozen or unresponsive payment terminal
- Customers accidentally using a non-NFC method (like trying to swipe a tap-only card)
So, how do you teach them to do so? Through workshops and training that involve role-playing and simulations.
Include error cases, like what to do when a card doesn’t register or when a customer panics thinking they were double-charged.
Ensure that your staff know how to calm a customer, retry a payment, and confirm the charge status.
Once they've mastered the technology side, the next step is to integrate payment into the overall customer experience.
Equally important, they need to learn to bring the payment experience into the customer experience.
For instance, we usually train our salespeople to ask customers to sign up for post-purchase reminders via WhatsApp or SMS at checkout time.
It’s that smooth handover—from the store to messaging—that instills trust and gives way to further interactions, ratings, and upselling.
6. Inform customers that you now accept contactless payments
You’ve done the work behind the scenes—terminals upgraded, systems tested, everything in place.
Now it’s time to let your customers know they can tap and go. And with 82% of global consumers already adopting contactless payment options, this is news worth sharing.
Here are simple, effective ways to get the word out:
- In-store signage. Window decals, counter signs, or display cards that show you accept tap-to-pay.
- Checkout screens. Prompts reminding customers of tap-to-pay.
- Receipts. Printed messaging about tap-to-pay availability.
- Email campaigns. Announcements or promotions for tap-to-pay.
- Social media posts. Highlighting tap-to-pay convenience.
But you can also take it one step further and make NFC payments even more valuable for your customers.
According to Len Covello, CTO at Engage People, a company that helps brands drive deeper customer engagement through loyalty solutions:
There are ways for retailers to integrate loyalty or rewards programs into NFC payments as a simple and frictionless way for consumers to earn and burn more points.
Here’s what that looks like: Mobile wallets can embed loyalty credentials, allowing rewards and offers to be automatically applied at checkout, minimizing extra scans or cards required.
No matter how payments or loyalty cards are received, it still hits the existing networks where downstream systems can calculate, earn, and execute processes like card-linked offers for members.
Set up right, your POS can connect each tap to a customer’s loyalty profile in real time, be it via email, phone number, app check-in, or token.
The key factor here is integration: your POS system, payment processor, and mobile wallet provider must work together to make this happen.
The potential is really huge, especially when tools like Pay with Points (PwP) are gaining traction.
According to Covello, this works really well when brands provide true personalization to members:
For example, tools like Engage People’s Access Plus and FIS’s premium payback have enabled PwP networks in loyalty programs today, allowing consumers to use their points for payments and discounts after tapping their card.
That same philosophy of seamless loyalty integration is echoed by platforms like PayPal, which are turning contactless payments into ongoing engagement:
Retailers can integrate loyalty programs and rewards into the NFC payment flow using an ecosystem of APIs, smart receipts, and rewards infrastructure.
For instance, with PayPal’s Smart Receipts feature, businesses can re-engage customers after they check out by delivering deals and personalized recommendations directly to their inboxes.
Additionally, Advanced Offers allows businesses to surface targeted cashback rewards and product recommendations right on the app.
Because this platform is integrated into the core payments and wallet ecosystem, retailers don’t need to rely on separate apps or hardware to enable loyalty.
The result is a contactless payment experience that’s not only fast and secure but also personalized and rewarding—helping businesses drive repeat purchases and customer loyalty seamlessly within their NFC-enabled environments.
Pretty neat, right? NFC isn't just a convenient payment option; it’s also elevating customer experience.
Final checklist before implementing NFC payments
I know this is a lot, so I’ve pulled the most crucial actions from each section to boost your odds of a smooth, successful NFC payments implementation:
POS system setup
☐ Choose a system that supports NFC and is EMV & PCI-compliant
☐ Ask if it accepts all major wallets (Apple Pay, Google Pay, etc.)
☐ Check if it supports offline mode, in case your internet drops
☐ Double-check that your hardware works, your internet’s stable, and your POS syncs with tools like inventory and loyalty
Payment processor compatibility
☐ Make sure your processor supports tap-to-pay cards and mobile wallets
☐ Ask for a clear breakdown of fees for contactless transactions
☐ Talk to your account rep to verify NFC functionality is enabled
☐ Run test transactions to ensure everything flows as expected
Merchant account
☐ Confirm that contactless settings are enabled
☐ Make sure your MCC (Merchant Category Code) allows card-present payments
☐ Check how NFC payments will appear in your reports (labeling matters for accounting)
☐ Check how NFC payments will appear in your reports (labeling matters for accounting)
Tools & integrations
☐ Choose cloud-based payment gateways optimized for NFC
☐ Ensure your POS syncs with other tools (like inventory, loyalty, or analytics platforms)
☐ Ask vendors about ongoing support and software updates
☐ Make sure all systems are secure and tokenization-ready
Staff training
☐ Train staff to troubleshoot common issues (e.g., failed taps, wrong cards, frozen terminals) with simulations and role-plays
☐ Ensure staff can reassure customers and retry a payment smoothly
☐ Teach them how to connect payments to loyalty sign-ups or messaging opt-ins
Customer communication
☐ Use signage, emails, receipts, and checkout screens to say “Tap to Pay is here”
☐ Promote security, speed, and ease as your core messaging points
☐ Add a bonus value layer: promote loyalty points, PwP, or exclusive tap-to-pay perks
NFC Payment Security: What You Must Know
In the eyes of experts, NFC payment is more secure than conventional methods, like credit card transactions.
Just ask John Hutton, global head of payments at LexisNexis Risk Solutions, a data and analytics company:
NFC Payments are generally very secure, and in many regards more so than other traditional methods.
This is due to the type and strength of the security mechanisms that make NFC payments robust, like encryption, authentication, and tokenization.
Seeing it through your own lens, though, doubts can creep in. “What if this new tech glitches, exposes customer data, or leaves me stuck when it fails?”
You’re right to be cautious.
If you don’t understand how the security mechanisms work, they’ll only sound like jibber-jabber.
Let's examine how these layers of protection work together to protect your business and customers, and why they make NFC payments safer than Fort Knox.:
1. Tokenization
With NFC payments, we often see a unique, one-time-use code known as a token, used for each transaction. They’re nothing like card numbers.
If attackers get their hands on a token, it will have no value to them.
This means, you get better protection against card-skimming and point-of-sale data breaches, with no change in the way you conduct business.
2. Encryption
Every time there's an NFC transaction, the data is scrambled into unreadable code (this is how encryption works).
An indecipherable code leaves spying parties scratching their heads. But for your business, it means less risk of eavesdropping and deliberate fraud.
3. Biometric security
An NFC transaction often requires a fingerprint, facial recognition, or passcode before getting the green light.
The approval process only takes seconds, but it’s enough to keep unauthorized users away with a heavy hand. Plus, it deters thieves from using stolen phones or cards to make payments.
4. Limited range and physical contact
NFC only works when the device is just a few centimeters from the terminal. Remote hacks or accidental taps are next to impossible.
Combine that with the fact that there's no physical swiping or inserting, and you've got a system that minimizes exposure on every level: fewer opportunities for fraud and less wear on your terminals.
All these features enable secure payment processing.
However, some of the experts I talked to stressed that even though NFC payments are highly secure, no tech is spared from potential vulnerabilities.
Here’s what they said you should know and what you can do to prevent these potential issues from creeping in:
One concern is the misuse of lost or stolen mobile devices if they are not secured by biometrics or a PIN.
Retailers should encourage customers to enable these security features.
Another risk is the use of outdated or improperly configured terminals, which could lack the necessary protections; using EMVCo-certified devices and keeping terminal software updated is essential.
Though rare, man-in-the-middle attacks remain a theoretical risk if terminals are poorly set up. Retailers can mitigate this by working with PCI DSS Level 1 certified vendors who ensure best-in-class security practices.
Regular audits and updates further reduce exposure to potential threats.
They should also render their point-of-sale (POS) systems EMV-compliant and regularly update them to close known holes in the security.
Add proximity checks that also guard against suspicious transaction behavior, such as payment initiated without the device being close to the reader.
They also need to strictly implement the transaction timeouts so that payment is possible only in a narrowly defined window.
In addition, the use of real-time fraud prevention systems, such as those utilized by banks, can notify and bar suspicious payment patterns.
Promoting awareness about potential threats and secure use methods among personnel and clients is also a simple yet effective line of defense.
Tap, Tap, and You’re Paid
Contactless payments let you get payments faster and smarter. It’s an excellent and secure way to accelerate checkout, reduce friction, and enhance the in-person customer experience.
The good news is that your POS system and payment software do most of the heavy lifting. All you need to do is choose the right ones and set them up right.
You may also be interested in these related topics:
- 5 Mobile Payment Processing Tips to Win Online (+ Top Tools)
- What Is Merchant Payment Processing? Everything You Need To Know
- POS System Demos to Help You Find the Right Fit for Your Retail Brand
- 20 Best Credit Card Processing Software Reviewed In 2025
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NFC Payments FAQs
You’ve made it this far, so I know you’re serious about implementing NFC payments.
But if you’re like most retailers, there are probably still a few what-ifs and wait-a-secs floating around. Let’s clear those up before you commit to investing in NFC.
How do refunds work with NFC transactions?
Pretty much the same way as regular card refunds. The customer taps to pay, and if they need a refund later, you simply reverse the transaction using your POS system.
Most major payment providers have step-by-step refund guides specific to their platform. For instance, here’s Apple’s official walkthrough for handling Apple Pay return transactions.
What are hidden fees to watch for with NFC-capable payment providers?
Most providers charge standard processing rates (i.e., a percentage + fixed fee per transaction). But here’s what to watch for:
- Monthly platform fees
- Terminal rental or setup charges
- Refund or chargeback fees
- Premium charges for using advanced analytics or digital wallet integrations
How can I track NFC payment performance and usage trends in-store?
Your payment processor or POS system likely includes built-in reports that track NFC usage. You can see when customers tap, how often, and what wallets they use. Over time, that helps you spot trends and level up the checkout experience.
