Large comparison of NFC, cloud and closed system frameworks

NFC, cloud and closed systems are the mainstream of mobile payment frameworks. Developers must master the advantages and disadvantages of these three to create a mobile payment system that consumers are willing to use.

There are three possible payment frameworks for general mobile wallets or payment applications: NFC, cloud or closed systems. NFC is loved by providers and mobile networks due to the high standards of security and risk management processes. Independent startups Like cloud wallets, they usually connect users' cards through a cloud service and use data connectivity, geolocation or QR code (quick response)/barcode to trade. Merchants tend to choose closed systems because they like themselves. A gift card system with repeatable stored value is the main source of funding.

These three ecosystems—NFC, Cloud Wallet, or Closed System—can even co-exist in a wallet and become a versatile mobile wallet that is easier to circulate to different device platforms, each of which may have its own Pros and cons, so developers must measure the cost of each and choose the one that works best.

Each type of mobile payment system has its own strengths and weaknesses. Although companies often measure business models, time-to-market or customer ownership to make decisions, ultimately, ease of use, security, and added value drive consumers to pay.

NFC payment application

NFC is like many other wireless communication standards, such as Bluetooth or RFID (radio frequency identification), allowing two objects to exchange data packets. Although Bluetooth or RFID can still operate when objects are separated by a few feet, NFC is relatively short- ─ Generally about a centimeter range, can be used in a variety of action use cases: share photos between friends, take a poster to get promotional media downloads or read the traffic card to get the current balance.

The applicant's NFC payment usually consists of three main components: the NFC antenna of the mobile phone, the anti-interference security component in the mobile phone (a smart chip, the user's card data is protected in the chip according to the EMV standard), and placed The non-contact NFC card reader in the store's checkout counter, if the consumer's mobile phone supports NFC, you can walk into any store that supports contactless payment, and sense the mobile phone payment on the card reader. For the merchant, this looks like The user swipes the card (or inserts a chip passcard, as in the US).

At present, there are more than 125 million mobile devices supporting NFC technology, which allows two devices to exchange data at a distance of about one inch. The electromagnetic communication between the card reader and the mobile phone lasts for 0.5 seconds. During this time, the card reader will read the data from the security chip in the mobile phone. This information is the same as the encrypted data written on the magnetic stripe of the plastic card, but with additional data and passwords added later, they can be effective. Sex.

The user experience of NFC payment is like this: when the consumer goes to the checkout, he will open the app, enter the PIN code, and when they are ready to pay, they will click the payment button or take the phone to the top of the card reader, or she just takes the phone. Above the reader, without opening the app, these interactions will vary depending on the non-contact standard of action used - the functional requirements specified by Visa payWave, MasterCard PayPass, American Express ExpressPay and Discover Zip - and card issuance How does the bank regulate the way its cards appear in POS terminals, the card readers alert consumers and businesses through loud buzz, the consumer's phone vibrates or displays some confirmation message, and the transaction is complete!

Although NFC technology (sometimes referred to as mobile contactless payments) is well managed and widely used in some areas, such as South Korea's public transportation and vending machines, it is not highly acceptable in other markets, like the US and The UK, due to a few points, such as the availability of devices and merchants, is mainly due to the complex and fragmented infrastructure of NFC technology.

Participants indispensable for NFC payments include mobile network operators (MNOs), trust management service platforms (TSMs), and service providers (possibly banks, merchants, or shipping authorization units). There are several wallets like Isis. With the participation of banks, this ecosystem will be more complex and there will be several TSMs and service providers.


It is agreed that TSM accesses the SIM card over the air, so it can install (and later remove) the card information of the bank customer, which is usually included in a small Java application that can be used by only one wallet application.


The card data on the device is securely installed and managed on behalf of the bank through the mobile data network.

Bank or card issuer

Issue cards to customers and specify how card information can be used in action situations.

service provider

Control the user experience and promote communication between banks, MNOs and customers, sometimes the service provider and the bank are the same, as the bank begins to integrate NFC payments as part of the mobile banking application.

In the past two years, there have been successful NFC pilot projects in many countries, promoted by cooperation between device manufacturers, banks and telecom operators... and supported by major payment networks like Visa and MasterCard.


From a security perspective, the main advantage of the NFC ecosystem is that consumers feel at ease. NFC payments are the safest form of mobile transactions. In order to pay, users must put their phones very close to the card reader. It uses strong bank-level security. Architecture, such as smart chips on the device (as compared to applications that store consumer card data in mobile operating systems or cloud services, hackers are almost impossible to destroy), as well as secure over-the-air data connections, multi-factor authentication And PIN code to prevent malicious use of any application, if the user loses the phone, call the bank or service provider to prevent the lost phone from making unauthorized payments, or to completely remove the payment function.

Similarly, research shows that if an action payment application is related to a consumer's financial institution, they are more likely to trust it, compared to a technology company like Google or Apple and a mobile network operator like Verizon or AT&T. Seeing that consumers are more able to accept financial institutions such as credit card networks and banks.

Moreover, the speed of the NFC transaction itself makes cash look obsolete, and some applications allow you to feel as much as you want, without having to open the application (usually for small transactions or transfer scenarios), rather than trying to put the bar code or QR code into place. Align the scanner (must be an optical scanner, because the cell phone glass screen reflects the laser light of the general scanner), some users feel that the NFC device is more natural, although it is less acceptable in the US than in Canada and Brazil. And slow (NFC POS readers have a higher penetration rate in the retail channel), NFC is definitely faster than credit cards and cash, from start to finish is about 1/3 of other forms of payment, take out the wallet, take out the credit card , swipe the card, enter the PIN code, get the receipt from the cashier, the time can take about 45 seconds (you look at it yourself!), if you have taken out the phone (you may do this when you are queuing boring), NFC pays It usually takes about 12 seconds, and the time the cashier gives you the receipt is saved, because the app can provide you with a complete transaction record.

The other advantage is that you can pay even if you don't have a data network (for example, in a large retail store where mobile phone signals are not available), because the system is built on the existing basis of our daily use of plastic cards, with membership cards, transportation tickets, The interoperability of identity cards and access cards has made it a major contender to replace wallets.


All NFC ecosystem members must work together before consumers can download apps and find compatible readers, like Isis, a rare joint venture between AT&T, Verizon and T-Mobile. Participants, including card issuers Wells Fargo and American Express, have spent a lot of effort in coordinating and building relationships. Countries like South Korea and Japan have already developed successfully in this system because they are usually individual mobile networks. Or device manufacturers are leading the important role of extending this form of payment to consumers.

Merchant acceptance is always a challenge for mobile payment applications, and NFC is no exception (although it is the most widely accepted), and the number of sales endpoints supporting NFC technology varies from place to place, like Canada, France, Brazil, and There are contactless card readers in shops and taxis in these countries in Poland, but in June 2013 there were only 500,000+ card readers in the US. This number may grow in the next few years because of the payment network ( Visa, MasterCard, American Express, etc.) adjust risk liability policies, put more scam purchase responsibility on merchants, and EMV cards like NFC cards can reduce the number of fraudulent purchases, and merchants must quickly ensure that they The POS system has been upgraded with the latest accessories, but currently, more than 7% of the 7 million retail stores in the US accept NFC.

Cloud payment system

“Cloud” storage is a technology buzzword that enters the world of payment. Now we can access our files and personal data from any connected device when we need it and where we need it. In this direction, we see that the currency is getting more and more The more abstract it is, now thanks to the mobile device, we can get our money from anywhere.

Some people think that cloud payment is the most efficient ecosystem. Compared with the NFC ecosystem, infrastructure work is less laborious. Customers register their cards with a secure Internet service, and any payment through mobile devices will be On the account of the source of funds, the sensitive card information (hopefully) will never be stored on the mobile phone. The transaction is to check the bar code and QR code (LevelUp) in the store, and then pay the goods from the consumer's device. Square Order), or use geolocation to verify the presence of eligible consumers (PayPal Here).

The earliest development of this system was PayPal, so it had the most users (15% of mobile users at the time of writing), but there are now many startups joining this fierce battle, according to the Payments category on the Angel List. There are about 1,100 homes! In the case of the LevelUp application, the user presents the encrypted QR code to the participating merchants, and then records it on their connected account. The merchant only needs to scan the QR code with the dedicated LevelUp scanner of the sales endpoint (LevelUp also has a business-specific The application), the reader clicks, after a few seconds the user receives an electronic receipt, and LevelUp also has rewards for frequent customers, so they can accumulate discounts.

Instead of being limited to any form of payment interaction, PayPal tries to maximize the number of compatible merchants by adopting the “Swiss Knife” approach. PayPal integrates as many payment methods as possible, including remote subscriptions, at the point of sale. Geolocation payments are especially far-sighted by entering phone numbers and PINs, punches triggered by geolocation, and even beacons using low-power Bluetooth.

When the user is within a few feet of a store, she can “call”, her name and face will appear on the merchant's sales endpoint application, and the customer simply says, “I pay with PayPal; I am Lucy,” Then you can take her double latte to leave.

Square is another advocate for trading through physical cards in the cloud. The purpose of this service is to transform traditional POS terminals and inventory systems, starting with a beautiful plastic card swipe device plugged into the phone's headphone jack, Square Recently ended Square Wallet, a payment product, which is a companion to the Register app. Users can link a credit card or a financial debit card, and then simply check in at the merchant they like, and provide their name at checkout. His face and name will be Appearing on the merchant's Register app (Figure 2-10), it is the pioneer of PayPal's geolocation payment function, Square is redirecting, and has released a new product called Square Order that allows users to go through an elegant ordering process. And click on the checkout to order food with nearby restaurants, they just have to go or drive to the merchant to take the meal.

Figure 2-10|Square's Register app, customers can use its sister app, Wallet, to punch cards (thanks to Fast Company and Square for providing images).

The product direction of Square and PayPal is mainly to make it easier for merchants to collect money, provide them with lower processing fees and allow them to accept card payment through credit card device accessories, and upgrade the traditional "cash register" - improve most of the troubles The user interface of the sales endpoint system, have you seen the checkout cashier looking for the item you ordered? Intuit, LevelUp and Revel are changing the situation and passing time on to customers, which is especially suitable for very small businesses, such as those in the world of gourmet dining cars, which can accept the growth of various payment methods.


Compared to NFC's complex infrastructure, Cloud Wallet is an agile alternative, and the barriers to entry for both users and developers are much lower. A startup that wants to enter this field is only required to comply with PCI DSS (Payment Card Industry Data Security). Standard) The cardholder's privacy policy, which is established by Visa, MasterCard, AmericanExpress, JCB, and Discover, provides multiple layers of protection for cardholder processing and digital transactions. Compliance with PCI and the creation of an API for processing payments is just a matter of creating a user experience that verifies the user: a) identity, b) has a valid card, c) wants to make a payment, new user registration Quite simply (once he fills out a terrible credit card form), it's faster than using an NFC app.

These types of applications are also hardware compatible. For example, users do not need to upgrade to NFC-enabled devices, so this method works on all major mobile platforms (unless it uses low-power Bluetooth beacons, You will need your phone to comply with the latest Bluetooth specifications).


Like the NFC e-wallet, it still faces the same acceptance challenge, both of which rely on merchants to have compatible hardware at the checkout – whether it's a laser scanner for barcodes or to identify registered customers. In the nearby app, when it comes to revenue, merchants tend to maintain a viable status and rarely want to try to change the cash register hardware—especially if they just spent $5,000 on the point-of-sale system.

Another blow to cloud payments is that they are not popular with merchants because merchants must work with acquiring banks to process their transactions, and these acquiring banks typically charge higher fees for higher risk transactions. Cloud payment is generally regarded as “no card transaction”, merchants have to pay a higher fee, which is the opposite of NFC payment. NFC payment is “card transaction”, which means that the cardholder and card are in front of the cashier, so the risk low.

After the user's card data is transferred and stored to the server, the cloud payment application keeps the user in the most insecure situation, although most applications, like PayPal, allow the user to set a PIN or password. Lock the application, but the application only has the same encryption strength as the cloud server and application communication, and the user's PIN code selection is safe. If the hacker eavesdrops on the user's mobile data transmission, use a Wi-Fi network. A method of forgery—that is, setting up a seemingly harmless public Wi-Fi network called “attwifi-free” or “free public Wi-Fi”—any phone connected to the network Will open a window to the hacker, let him see the password and the cardholder information transmitted between the application and the cloud server, the cup of double latte may be more expensive than the user thinks!

Another practical challenge is that it is impossible to trade without a trusted network or without a Wi-Fi network. Even if the data connection is not an issue, the user often waits for a transaction confirmation in the form of a push message, a newsletter or an electronic receipt. Delays will be felt, even in today's fast 4G LTE network and public Wi-Fi hotspot world, short delays are enough to slow or hinder cloud payments.

Closed payment system

Closed-end payment systems are like small money cans in retail stores. Consumers can save money for later use. They are based on stored-value cards and can only be deducted at one store. A matching mobile app can make customers The money deducted from the stored value is usually displayed at the sales end point QR code or bar code, the user can store the value card indefinitely, only want to spend money on a specific merchant, avoiding their financial information and bank account exposure, to the user It is also a good way to budget for a specific type of consumption, like groceries or restaurants, where merchants often combine customer loyalty programs with closed cards to keep customers coming back.


From the perspective of acceptance, closed applications are easy to implement, because they are usually the merchant's own, especially fast, because the bar code and QR code that most laser scanners can read, and the modern sales endpoints With a laser scanner, the checkout cashier only needs to point out that the customer pays with the gift card.

Depending on the amount of his stored value, the user's risk will be low. For the first time users who want to try to pay for the action, these low risks make the closed system a good entry point, because these cards are often tied to the reward program. It can also display the point record to the user, encourage him to earn enough points to get free goods and save money for future purchases, because on the mobile device, the closed application that can track the balance greatly improves the plastic card. Inconvenience, users do not need to ask the merchant to swipe to check the balance, or the balance is surprisingly low than expected, these applications are completely compatible with the device, can be used on any mobile device ... or even smart watches! It can be used even when there is no data signal - this is better than cloud payment.


These experiences do require a wireless network connection, so users can see the current balance before scanning at the checkout (to avoid slowing down the checkout rate and being glared by other customers), otherwise she won't know if the money is enough.

Closed systems, as the name implies, are closed: they can only be used in the same relationship retail store. This restriction will make the user's mobile device home page full of icons of her favorite store instead of providing her "a universal e-wallet" .

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