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Why NFC phone payment may not be a big deal in 2013

NFC phone and nfc payment scannerThis is the second in a series of articles, which predict what will not happen in 2013.  One of the most touted recent trends is “contactless payment” with Near Field Communication (NFC).  Despite what some enthusiasts say, I don’t think people will be throwing away their wallets and credit cards this year for a NFC phone.

Near Field Communication 

NFC is a technology that allows mobile devices to exchange information easily and simply. By merely bringing the mobile device (usually a smartphone) into close proximity with another mobile device, NFC-compatible terminals, or unpowered chips (i.e. “tags”), data is quickly transferred.  Ideally, NFC is “contactless communication”; neither touching nor multiple steps are necessary to set up a connection.

Strict international standards are maintained by the NFC Forum. Founded in 2004 by Sony, Nokia, and Philips, the forum strives to ensure compatibility as well as interoperability between wireless communication methods as well as various forms of NFC technologies.


NFC is not Bluetooth

NFC wireless communication may look like Bluetooth, but there are significant differences. Bluetooth, for example can communicate up to 30 feet or more, while NFC, an offshoot of radio-frequency identification (RFID), only works within a few feet.  NFC also operates at slower speeds than Bluetooth.  These differences are by design.  Bluetooth is for large data transfer over prolonged periods of time.  NFC’s speed and short range result in lower power consumption, a significant issue for mobile devices.  Even more important, no multiple steps for pairing two devices are required for NFC, as it is for Bluetooth. Ideally, NFC-compatible devices automatically establish connection within 0.1 seconds.



NFC is envisioned for a number of applications including electronic keys for cars and homes. Tags allow owners of NFC-enabled mobile devices to access special offers or information at events.  A person could touch a RFID-embedded poster, let’s say at a wedding, and have the event’s pictures uploaded to a social media site.  Tags can also be used to automate programming for smartphones.  For example, when you enter your house, you could swipe a tag posted on your door to change your phone settings from business to personal.

An obvious use for NFC is personal and business networking. While data transfer between passive tags and mobile devices are one way, two NFC phones or smart phones could engage in a peer-to-peer exchange. With NFC, physical business cards could go the way of hotel keys and dial-up modems.


Contactless payment

However, it is “contactless payment” that has caused the most excitement about NFC. At least a dozen countries have set up NFC payment systems for buses, trains, and other forms public transportation.

Google Wallet uses NFC technology to enable users to utilize credit, debit, and other cards on their smartphones at hundreds of thousands of merchant locations across the country. Some MasterCards offer PayPass, a service that works with Google Wallet.  PayPal can also be used with NFC phones and NFC-compatible devices.

The fast growth of NFC-enabled devices, with the wide spread acceptance by financial institutions, governments, and merchants have led some to predict a wallet-less future.  No credit cards or cash; your smartphone will be your ATM.


NFC is the future, and the future is now

Popularity in Asia and Europe, as well as excitement about contactless payment has caused a lot of smartphones providers to jump on the NFC bandwagon.  Nokia has launched a Windows-based NFC phone. Samsung and Orange have several NFC-enabled phones. It is estimated that 15 percent of all new Android devices have built in NFC capability. When the iPhone 5 turned out, contrary to rumors, not to have NFC, it warranted a New York Times Story.


Well, maybe the future isn’t now

During September, 2012, banking representatives gathered in Sydney to discuss their enthusiasm for contactless payments and the public’s startling lack of it.  Attendees at the “The Mobile and Contactless Payments Australia conference” couldn’t figure out why, despite banks’ heroic efforts to roll out latest technology, average folks were simply not using NFC for contactless payments.

Why aren’t people doing what the cool kids are doing?  Don’t they want to be hip?

I think the problem with contactless payments can be summarized in the headlines of articles on two different tech sites:

  • “Banks: Contactless, NFC are solutions looking for problems” ZDNet
  • “NFC Is Great, But Mobile Payments Solve A Problem That Doesn’t Exist” Tech Crunch

The average person will always have to carry a wallet, because of ID.  Just as some businesses still won’t take credit cards, not all merchants will take NFC; it just an added cost that many consumers will not use (smartphone usage in the US by the general public is less than 50%)  The physical actions of NFC contactless payment are not significantly easier than using a credit card. If someone is already carrying cards and cash, why bother with NFC?

As the article in Tech Crunch declared, “In essence, the only true value given to the consumer is the fact that it’s ‘cool.’”


The future will be delayed, but it still is coming

I think certain types of contactless payments will be used.  When you are getting on a bus, whipping out your smart NFC phone really is easier than fiddling with cash or cards.  It is not an accident that public transport is one of the first and most widespread applications for NFC.

I suspect that the first large scale use of NFC will be to exchange virtual business cards.  Physical business cards are a pain. Every Customer Management System (CMS) in the world has the same problem; salesmen don’t like manually entering information from a lead’s business card.  Trying to collect data from a successful tradeshow can be especially grueling.

The tediousness of physical business cards is one reason that “Bump” is the eighth most popular free iPhone app of all time (it also works for Android as well).  While it transfers information from one smartphone to another, it’s not as fast as NFC.  Bump takes only a few seconds more than NFC phone, but those seconds count.  A tradeshow professional reported to me that he had routinely lost information about contacts, who were on their way in a hurry to some other meeting.  NFC phone is perfect for the exchange of virtual business cards.

With NFC-compatible technology so widespread on smartphones, it is only a matter of time before business people discover the advantage of NFC for exchanging contact information.   This will lead to more widespread use of contactless payments, but probably only for business expenses.

If they haven’t already, someone will make an application for payments made on smartphones to be automatically entered into a form for business expenses, another annoying chore that many hate doing. Instead of keeping a separate credit card for business expenses, a professional will simply use his NFC-enabled smartphone, which he probably got from his company.  Of course, he will still keep credit cards and cash for personal use.

All these changes will take time. So the future is coming.  Just not this year.

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