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What Happens Behind the Scenes When You Buy Things with Your Phone
What Happens Behind the Scenes When You Buy Things with Your Phone

You’ve decided to buy a new pair of shoes, and you’re going to pay for them by tapping your smartphone against the checkout stand. It’s just like using your credit card — except that it isn’t. Here’s what’s really happening to the money on your phone, when you spend it and when you are just carrying it around.

Tapping the Phone

So back to those shoes. You’ve got them up at the counter, and you take out your phone to tap it. At the moment the transaction occurs, your phone is using NFC, or Near Field Communication, to network with the checkout stand.

Your phone has an NFC chip that uses a very small electromagnetic field to send your credit card information to an NFC chip in the checkout’s reader. It only works over a distance of a few centimeters, so you have to hold your phone very close. Once your payment information is transmitted, the process works the same as if you’d just swiped a plastic credit card.

Getting Your Payment Approved

During that suspenseful second or two before the register says “approved,” and the clerk hands you your receipt, a lot is going on. The checkout terminal sends your data to the acquiring bank, which is the bank that processes credit card transactions for the store. It’s called the “acquiring” bank, or just the “acquirer.”

The acquirer sends a request to the bank that issued your credit card, asking for authorization; essentially, the...

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