If you’re a small-business owner considering updating your point-of-sale system to accept EMV credit cards, payments industry experts say there’s no better time to start accepting payments made with near field communication technology, too.
But EMV and NFC are more than payments-industry alphabet soup. Here’s what you need to know about the two technologies and why you should update your POS system to enable both.
What is EMV?
EMV, otherwise known as chip-and-pin or chip-and-signature, is the new credit cards standard the U.S. is in the process of adopting. Starting in October, businesses will be liable for counterfeit fraudulent charges if they don’t have the technology to accept a customer’s EMV card. You may have to update your business’s POS system to be able to accept EMV credit cards. (EMV stands for Europay-MasterCard-Visa, which first backed the technology.)
What is NFC?
If you’ve used Apple Pay or have watched someone use it, you’ve seen NFC technology in action. NFC makes it possible for a customer to pay for something by simply holding a smartphone over the payment terminal — no contact required. It’s the wireless form of EMV, says Jason Oxman, CEO of the Electronic Transactions Association. Android Pay (just launched) and Samsung Pay (available Sept. 28) also use NFC technology.
Reasons to enable EMV and NFC technology at the same time
1. It makes economic sense
Updating your POS system to accept EMV credit cards may require updating your POS hardware, software or both, but it can be seen as an investment against fraud. And as long as you’re making the investment to update your POS system, it makes financial sense to choose a system that also accepts NFC payments. Most POS systems that support EMV transactions also support NFC, Oxman says, so adding NFC capabilities won’t mean much of an added expense, if any.
Find out which POS systems support EMV and NFC technology: We’ve compared the best POS systems and seven of the best POS systems for restaurants based on features, cost and the types of payment technologies they support.
2. Mobile wallets are growing in popularity
Mobile wallets haven’t quite caught on with consumers yet, but adoption is growing. Of U.S. consumers with a smartphone, 37% have used a mobile wallet recently or plan to use one, up from 29% in 2013, according to a 2015 survey of 1,716 consumers by Chadwick Martin Bailey, a Boston-based market research and consulting firm.
As more customers start using Apple Pay and similar mobile wallets, small businesses should be ready to “meet their customers where they are” by supporting new payment methods, says Chris Cox, vice president of mobile commerce solutions at the global payments company First Data.
“You don’t want to turn away a customer because you can’t accept NFC,” Cox says.
3. NFC enables extra layers of security
Equipped with microchips that generate a unique transaction code for every purchase, EMV credit cards are more secure than cards with magnetic stripes. EMV cards make it nearly impossible to copy credit card data to produce counterfeit credit cards, but they don’t protect against all kinds of fraud.
NFC-enabled mobile wallets add an extra layer of protection against fraud. They use tokenization, which means card numbers are stored and transmitted as random numbers, or tokens, which are meaningless to fraudsters. Additionally, Apple’s Touch ID allows people with Apple Pay to use their thumbprints as a secure password.
The bottom line
Starting in October, you’ll be liable for counterfeit fraud that occurs at your business if you can’t accept a customer’s EMV credit card. Although that won’t be the case with mobile payments, it’s a good time to update your POS system to support both EMV and NFC technology. In many cases, your new EMV terminal will be equipped to accept NFC payments anyway, so you won’t have to shell out extra money to be able to accept mobile payments.
Compare fees and others factors to find the best POS system for your small business:
For related information, visit NerdWallet’s resources on how to start a business. For free, personalized answers to questions about starting and financing your business, visit the Small Business section of NerdWallet’s Ask an Advisor page.
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