The dream of making payments using our smartphones at the corner store may be closer to reality with the recent developments in the market. Google announced support for Host Card Emulation earlier this year on its Android operating system, making the use of Near Field Communication (NFC) a lot easier on Android devices. And now with even the most skeptical analysts predicting the next iPhone 6 will carry the same Near Field Communications technology, it’s time to catch up on: What is Near Field Communication after all?
Near Field Communication is a term coined in 2002 when Sony and Philips began building radio frequency identification (RFID) specifications for mobile phone applications. In 2004 Nokia, Sony, and NXP Semiconductors (Philips Semiconductor at the time) founded the NFC Forum to develop specifications for proximity communications (approximately 4cm) between smartphones and other devices such as payment terminals. Conceptually similar to Bluetooth, NFC is a short-range radio frequency communication protocol based on ISO Radio Frequency Identification (RFID) standards and expanded for peer-to-peer communication and secure mobile payment applications. Most people who use RFID don’t know it by name even though they use it every day when they wave their ID badge at RFID readers to enter a buildings or open transit turnstiles, for example.
Near Field Communication provides the same short range data exchange functionality and more for smart phones and other smart devices. The NFC Forum imagines several uses for NFC technology, the primary one being NFC mobile payments. A phone with NFC technology can be waved in front of a reader or POS system at a merchant to transfer payment or coupon credentials to the merchant system or to participate in a loyalty program. NFC mobile payment provides greater security than plastic cards and offers a huge potential for marketing opportunities through use of user information available on the phone. Other uses for NFC include transactions or exchange of information between two NFC phones within tapping distance of each other and triggering actions on your phone by tapping an NFC tag on signage.
NFC is a bi-directional communication protocol that can communicate in both in active (powered RF antenna) and passive (induction powered antenna) modes. Active mode applications include contactless payment, access control, and bootstrapping other connections. Passive mode is largely envisioned for use with NFC contactless smartcards and with NFC tags in marketing and user experience applications.
At the physical layer there are two basic components on an NFC device: an antenna and a controller chip. These two components are present in all NFC devices and tags. A third component, the secure element, has been required for contactless payment applications until just recently with the emergence of Host Card Emulation. The secure element provides physical isolation for card data security in the phone and a secure environment for the phone to perform card emulation. HCE bypasses the need for a secure element by allowing the communication channel from the RF controller to connect to an authorized mobile app instead of the secure element.
In either case, it is the NFC RF antenna and controller built into the phone that allows the phone to make a contactless payment when presented to an NFC reader on a POS. When an NFC phone is placed in close proximity to a POS reader, the RF fields are detected by the devices and communication is established by the NFC controller. The POS reader passes smartcard application protocol data units (APDU) requests and responses to the secure element or HCE client to initiate the card emulation. The POS is unaware whether the secure element or HCE client is performing the card emulation.
A complex ecosystem has sprung up around NFC mobile payments since its creation a decade ago. Entities such as the concept of trusted service manager (TSM) were created to handle the management of secure element and provision cards to mobile devices. Industry bodies like, GlobalPlatform, expanded on the TSM ecosystem to define actors, roles, and secure protocols for handling multiple cards in the secure element. Other standards groups related to NFC include EMVCo, which defines the specification for smart cards and is the basis of secure element security.
Bottom line is that for a long time NFC was a promise, but finally it seems it will be a promise kept.