NFC Technology

Businesses are often in a bit of a catch-22 when it comes to protecting their users and customers with rigorous identity verification. People want the companies entrusted with their information to be safeguarded against fraud, but they may balk at identity verification methods that feel too intrusive or lengthy.

Striking the proper balance between convenience and security is a constant challenge for merchants and other organizations that handle sensitive data.

Any new technology that can improve security and reduce fraud without negatively impacting the quality of the customer experience is worth a closer look.

Reliable identity verification must be premised on certain intrinsic qualities or properties of the individual being verified: things that only they would know, for example, and things that only they possess. Smartphones and other personal devices can be useful for verifying identities, but getting heterogeneous devices to smoothly interface with many different verification systems can be daunting. This is where NFC comes into play.

As a set of standardized protocols for wireless communication, NFC can be used to enable fast, easy, and seamless verification processes across a wide range of use cases.

What is NFC Technology?

NFC uses radio-frequency identification technology to enable wireless communication across short distances (not more than a few inches) with minimal hardware.

When two NFC-equipped devices are within range of each other, they can exchange information in either direction. Passive NFC devices can function without a power source—when they come within range of a NFC chip reader, the magnetic field provides enough juice for them to transmit their stored data.

One of the first commercial implementations of NFC technology was in Star Wars action figures that could “talk” to each other when placed close together. More practical applications soon followed, and cellular phone manufacturers started incorporating NFC capability into their products. Today, NFC technology is widely used in wireless payment systems like mobile wallets and contactless chip cards.

How Can NFC Be Used for Identity Verification?

One of the most critical moments for user identity verification is during their initial onboarding.

Users are more likely to tolerate a lengthy and involved verification process when they know it’s the first (and presumably only) time they’ll have to go through it, and it’s far better on many levels to stop a fraudster when they’re first trying to sign up for a site with falsified information, rather than trying to sniff them out with behavioral analytics and other methodologies after the fact.

For these reasons, it’s not uncommon for organizations that deal in sensitive or potentially valuable data—social networks and online banking sites, for example—to ask users to present government-issued IDs and other official documents as part of the verification process.

Requiring new users to show their ID works well enough in person, but it can be far more challenging in remote environments where forged or copied documents can be much harder to detect. As an increasing number of countries begin to issue smart ID cards and e-passports with embedded chips, it becomes more feasible to implement identity verification solutions that use NFC technology to check the validity of those documents.

The user can upload an image of their ID and then scan its NFC chip with their smartphone, verifying that the information seen on the ID matches the information encoded on its chip.

When combined with another identity verification method (asking the user to take and upload a selfie, for example, or requiring them to log in through a verified social media account), NFC technology can provide strong assurances that the person signing up is exactly who they say they are.

What are the Advantages of Using NFC for Verification?

While smart IDs are becoming more common, they aren’t exactly ubiquitous yet, which means that some organizations may only be able to offer NFC verification as one option among many for authenticating their users. However, there are good reasons to embrace this technology and become an early adopter.

For starters, NFC thwarts document forgers. Fraudsters have gotten good at replicating the physical security features present on identification documents, but even the most skilled forger will find it impossible to copy encrypted data on an NFC chip.

Even if a fraudster had the capability to clone an NFC chip, they’d have to get very physically close to their victim to do so—the fact that NFC only works over very short distances makes it more secure.

NFC can also be a way to ensure you’re compliant with any applicable KYC (Know Your Customer) regulations in your region. Failing to properly vet and authenticate a new customer not only means you might have let a fraudster into your system, it also exposes you to the risk of official fines and other penalties if any of your real customers get victimized. This is an especially serious concern for merchants who deal in financial services.

Conclusion

For merchants, the fight against fraud is a fight to protect their revenue, and indeed the very health of their business. When a fraudster breaches your defenses, you risk losing significant sums of money to fees and chargebacks, to say nothing of the detriment to your reputation for trustworthiness. Fairly or not, when a customer gets victimized by fraud, they frequently assign some share of responsibility to the merchant involved.

By educating themselves about the latest and most effective defenses against fraud and identity theft, merchants can develop informed, long-term strategies for protecting the sanctity of their users’ accounts.

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