Near Field Communications (NFC) is one method of enabling the implementation of secure contactless payments. NFC is a short range RFID technology that requires very close proximity between devices in order to share information, hence the “tap and go” term you often hear when referring to this form of contactless payments. NFC is similar to Bluetooth technology, but doesn’t require the sometimes complex pairing of devices that challenges the end user.
With the rest of the world barreling along the express lanes with many varied implementations of contactless payments, US implementations stay off the main highway and continue down the walking path. NFC is an interesting technology that is applicable to many areas outside of payments which affect consumers directly. Sharing songs, information, acquiring coupons and security access are all non-payments applications that will contribute to acceptance.
Around the Globe
There continues to be a great deal of global activity involving contactless payments through the use of NFC. Highlighted below are some of the more promising implementations announced recently.
As I write this, news has broken of Barclays release of their Paytag contactless payment solution in the United Kingdom to handle small payments. This device turns any phone, even if not one that is NFC enabled, to act as a contactless card. Barclays is rolling out these devices to their British Barclaycard holders, permitting purchases of up to £15.
Sony’s Felica RFID smart card system is gaining wide acceptance in Japan, being used not only for payments, but is beginning to tap the potential of NFC for other uses, including transfer and storage of health records, student/employee access ids, railway, air and bus access and many other daily uses.
Utilizing Paybox NFC, McDonalds and the supermarket chain Merkur will participate in a pilot testing program NFC payments in Austria (more details can be found at NFCworld).
In a non-payments application, BMW is offering an NFC implementation allowing you to download your hotel key to your car keys and open hotel room doors (related news story here).
In the US
Why is the US so slow to adopt? There are several very valid reasons and some that are typical barriers to the introduction of anything new to the market. And, as we all know from experience, perception becomes reality in the eyes of the consumer.
Lack of devices which take advantage of NFC technology
Devices are not widely installed that can take advantage of the contactless technology. Even with adoption and adaptation by smartphone vendors, if merchants aren’t capable of completing the connection, consumer acceptance becomes a moot point.
NFC technology not the driver for smartphone purchase
At some point, for general acceptance, NFC and contactless payments must become either “the” or a “significant” reason for a smartphone purchase. Today NFC is just novelty, preloaded functionality of which most smartphone owners don’t even know is there.
Perceived or real, the US consumer is always initially hesitant to jump into a technology that has no “touch and feel”. Although most of the security concerns tied to NFC communications require very specific circumstances for there to be a breach, the fact the possibility exists makes many leary of the concept. Security concerns are being discussed and addressed through the Smart Card Alliance, hoping to establish security standards that will further acceptance by both consumers and industry experts.
According to a survey by mobile security firm Entersekt, “With people increasingly banking and shopping online, many are convinced it’s just a matter of time before their personal data is stolen”. With this general opinion regarding financial transactions online, skepticism is a natural concern with any new technology, abated only through practice and use.
Use of NFC Outside of Payments
With all the varied uses of NFC outside of payments as a path of contactless information sharing, some feel that the offering of smartphone applications that put the technology in common use will fuel the consumers acceptance and use as a payment methodology. These applications have great potential in many non-payment areas, including ticketing, access, information sharing and advertising.
Although some major industry players have entered the market, until the mainstream consumer population accepts contactless payments as a secure and necessary part of their day to day life, investment in new applications and hardware will remain uncertain. Contactless payments are seen as a vast and mostly untapped market in the US and competition for this business is will likely heat up in the coming months.
Given the size of that potential market, it’s only a matter of time until the acceptance of contactless payments occurs and, at least at this writing, NFC will likely be a part of that future.
Information sources for NFC: For more detailed information regarding Near Field Communications, it’s technology and uses, use the NFC Forum