December 19, 2012, 1:22 PM — Near Field Communication (NFC) is a short-range wireless communication technology that can be used to pay for retail transactions and other digital exchanges.
(This story accompanies a broader look at NFC and its uses, "Despite Apple, NFC is catching on -- just not for payments quite yet.")
NFC is already appearing in many smartphones and some tablets, and has been widely deployed for years in Japan and South Korea for tasks including transit rides and small retail purchases. Early NFC trials for purchases are underway in Europe, India and the U.S.
An NFC chip in a smartphone can be used to communicate with another NFC-ready device. The technology operates in two-way fashion, so that information can be passed in both directions. That means a bank can electronically authorize payment to the store via an NFC-ready smartphone, and the store's NFC payment terminal can then send the phone a receipt as well as a coupon or other promotion for a future purchase.
NFC smartphones can also be used to read NFC tags -- small NFC chips that can be attached to signs to transfer information -- and to swap music and other data files. Phones like the Samsung Galaxy S III use their Android Beam feature to use NFC to kick off a Bluetooth data transfer.
How it works
The technology builds on Radio Frequency Identification (RFID), first patented in 1983, which uses an ISO/IEC standard. NFC was approved as an ISO/IEC standard in 2003. The NFC Forum, formed in 2004 by Nokia, Philips and Sony, promotes NFC and device compliance and now has more than 175 member companies, including banks that issue credit, wireless carriers and mobile device makers.
NFC-ready devices must come within 4 centimeters (roughly 1.6 inches) of each other to communicate. Unlike what's shown in some commercials, a physical touch isn't required to share information.
Bringing two devices containing NFC chips together activates magnetic induction, similar to the way proximity cards and access cards carried by workers have been used to unlock doorways for years. Once the two devices are linked, they exchange data over the unlicensed 13.56 MHz radio spectrum -- the same spectrum as proximity RFID tags and contactless smartcards -- at the relatively slow data rate of up to 424 Kbps.