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My organization is trying to move away from contact based smartcards (because our hardware vendor is no longer integrating them into their current systems) to some other form of two-factor authentication. We are looking into NFC, and we have the NFC cards (with built in contacts as well) in the standard ISO ID1 full-card size, but I'm having a hard time finding an NFC based reader that will fit our demands. Is NFC used currently for two-factor authentication? I can't find any documentation on it aside from the yubi key supporting it.

The second problem is the only NFC hardware I can find right now is USB based. The problem is these machines are going to be on site in a dangerous construction environment and so the keys will probably break off if they are a USB based solution. We had USB key authentication and the users broke off their keys in the port and damaged the motherboard of their laptops.

Basically the question boils down to this: is it possible to integrate NFC authentication from a software standpoint into our current smartcard solution easily? I assume the hardware will change eventually to integrate NFC into most devices.

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Whether and how to integrate NFC into an industrial application is a shopping question, and off-topic for this site.

But the advisability of using NFC for 2nd factor authentication is interesting. NFC use in ID cards isn't quite as popular as the more broad RFID specification, on which NFC is based. But the challenges are the same: specifically, if the ID token is a simple number, then reading the card is all that needs to be done to clone the card. The proxmark3 is a popular tool among penetration testing teams which can read and then replicate most popular ID tags at a fair distance.

If the ID tag instead embeds a cryptographic key, then the tools and architecture around it has to be dramatically more complex. But such a card should be resistent to drive-by cloning.

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I will answer my own question on this one. I went to a Microsoft Security conference and was demoed the new security features in Windows 8.1 that have built in NFC authentication support. Something to look forward to in the future...

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When you get more details/experience I'd be interested in hearing about it –  makerofthings7 Jul 23 '13 at 18:10
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