Near Field Communication (NFC) technology has been promoted worldwide for several years as a universal solution for contactless payments. Various projects using NFC are actively developing in Europe and the USA, although with varying success. The Ministry of Finance portal learned about the prospects for the development of the NFC payment system in Ukraine.

The NFC system allows you to pay for goods and services using smartphones and tablets. "This technology can be implemented not only on a plastic card, but also on other items - keychains, watches, and, most importantly, on mobile phones and tablets. In this regard, the process of paying with a card with a contactless interface and a phone, for example, may differ in convenience for the client and the payment process,” explains Anton Romanchuk, Chairman of the Board of UPC.

Mobile devices establish a high-frequency connection at a distance of 5-10 cm. In practice, this means that by bringing a mobile device to the terminal, the user gets the opportunity to make a payment wirelessly, which significantly simplifies the purchasing process. The first test payment using the NFC system in Ukraine was carried out in June of this year. The project was presented by the telecom operator Kyivstar, Alfa-Bank and the MasterCard payment system. A Kyivstar employee paid in a cafe using a mobile phone with a SIM card of the domestic operator.

"Using SIM cards from operators with NFC technology will in the future allow for the aggregation of cellular network access, bank cards, travel documents, work passes, discount cards, and much more, which currently overload citizens' wallets, in a single terminal (the client's phone). In fact, all the "profiles" of bank cards, discount cards, and official documents can be loaded onto a single SIM card," predicts Lesya Zaporozhets, Head of Mobile Commerce Development at Kyivstar. The operator, she adds, plans to provide these subscribers with the ability to conduct transactions using the new technology by the end of 2013.

The advantages of NFC also include high payment security. According to Sergei Shatsky, Head of Projects and Programs at Raiffeisen Bank Aval, contactless technology eliminates the main threat – data skimming when the card is placed in a device or in the hands of a fraudster. "Secure Element, installed in phones that support NFC technology, is responsible for transaction security. "Secure Element is a chip that is resistant to hacking, provides secure storage for payment applications, payment transactions, and the storage of confidential data," adds Konstantin Litvin, Head of the Innovative Technologies Department at FUIB.

At the same time, the smartphone owner can set a code to lock/unlock their device. "Such a code limits access to the smartphone software (the so-called "wallet"), which manages the card. To carry out a transaction, the client needs to launch a special program (wallet) on the smartphone. “Entering this program also requires entering a code; it is impossible to carry out a transaction without logging into such a program,” adds Alexander Bezzubov, Director of E-Commerce Development at Alfa-Bank.

Obstacle Course

A number of factors are hindering the popularization of the technology. Firstly, at the moment the coverage of retail outlets that could provide payments using NFC technology is not very large. “Today, more than 18 thousand POS terminals installed in hypermarkets, pharmacies, cinemas, cafes and restaurants support NFC, which is more than 12% of the market,” says Konstantin Litvin, Head of the Innovative Technologies Department at FUIB. In addition, not all phones are equipped with the new technology.

However, experts expect a rapid increase in the number of terminals and mobile users with phones that support the technology. Contactless payments are expected to be popular at gas stations and parking lots, at cultural and sporting events, in cafes and fast-food restaurants—in other words, in places where a large number of people are served at the same time and instant payment authorization is required, and the purchase amount is relatively small.

"NFC technology allows bank cards, transport apps, loyalty cards, and access keys to be emulated on a SIM card, turning the phone into a tool for paying for retail purchases with a single touch, a public transport pass, an electronic pass, etc.", notes Alena Lavrenko. The main thing, she adds, is for service providers to come to an agreement among themselves: banks are not yet ready to share their acquiring income with mobile operators, and operators are not ready to provide banks with full NFC support for free.

Cloud Future

Experts are not expressing unequivocal confidence that NFC payments will take root in Ukraine. But many of them are confident that in 2-3 years this technology will become widespread. According to Konstantin Litvin's forecasts, this period will be enough for a turning point to occur, and for all mobile operators, as well as dozens of banks, to offer their clients the opportunity to make contactless payments using NFC technology.

"In one or two years, we expect the appearance on the market of widely affordable mobile phones with full NFC support, which could give a new impetus to the development of payment technology, when any payment can be made using a mobile device - be it the Internet or a real store," agrees Anton Romanchuk.

Not everyone shares such optimism. Deputy Chairman of the Board of PrivatBank Alexander Vityaz is categorical regarding the prospects of NFC in Ukraine. "Implementing contactless payments based on the NFC standard requires banks and retailers to invest millions of dollars and devote significant effort to software certification and hardware replacement, so we are skeptical about its development prospects," he says bluntly.

According to the expert, the future lies with another technology—QR codes—which require neither sellers nor buyers to use additional equipment. This payment method, he notes, is fast and completely secure, since the customer's payment card number doesn't even pass through the point of sale. QR codes are recognized by scanning equipment, including a mobile phone camera. "All you need to buy or sell a product is a smartphone on Android or iOS, a QR code scanner, which is already available at retail outlets, a computer, and internet access," summarizes Alexander Vityaz.

One ​​way or another, experts agree on one thing: contactless technologies will very soon become popular in Ukraine. "The conditions for the growth of contactless payments are already being created in Ukraine. Both issuing and acquiring banks are no longer simply thinking about contactless payments, but are actively updating terminals and starting to issue contactless cards. “The peak of contactless payments in Ukraine is still ahead, including payments using NFC,” summarizes Natalia Kuzmich, Head of the Alternative Channels Development and Sales Support Department at UkrSibbank BNP Paribas Group.