Mobile Payments - What is it and how does it work

The terms Apple, Samsung and Android Pay are probably familiar to you since those payment methods gain more and more popularity and acceptance in retail stores but how does it actually work and what is the technology behind it?
Let's break it down!

1. The technolgy behind mobile payment - NFC

All three mobile payment providers use NFC (Near Field Communication) as the underlaying technology which allows two devices placed within a few centimeters of each other to securely exchange data.

To better understand what NFC is and how it actually works let's have a look first where it originates from. The parent technology is called RFID (Radio Frequency Identification) and is a method to identify uniquely items using radio waves.

You probably used the RFID technology many times in your daily live for example

• To pay contactless with you debit / credit card
• To enter your secured office building with your employee card
• To scan items in your grocery store

NFC however is a specialised subset within the RFID technology that uses the High Frequency (13.56MHz) of RFID which only works in close range.

This infographic is a courtesy of atlasRFIDstore

2. How does the payment process at the point of sale work

The following explanation assumes you have an NFC supported smartphone and your wallet is setup.

1. To purchase items in a store that supports mobile payments you typically need to tab or hold your phone close the the NFC powered point of sale terminal to establish a connection via NFC.
2. Usually at that point you smartphone prompt with a message to enter either your pin or scan your finger to approve the transaction.
3. The transaction is than validated with a seperate chip called Secure Element (SE) which generates a random, one time number (tokenization) based on your card information and returns the authorization back to the NFC powered point of sale.
4. At this point the payment processes the same way it would in a traditional credit card transaction.

I believe that it won't take long until credit cards are history and mobile payment will be the new norm. For one NFC payments are more secure than paying with credit card due to the additional authentication step and secondly because using smartphones is already a big part in our lives and people love to use it for convenient payments.