NFC, short for Near Field Communication is a short-range wireless RFID technology that makes use of interacting electromagnetic radio fields instead of typical direct radio transmissions used by technologies such as Bluetooth. It is being predicted that gradually this technology will transform our mobile phones into a wallet loaded with payment cards from multiple sources including credit cards, health cards, loyalty cards and many more. As compared to its prior technologies such as RFID and Bluetooth, NFC is considered to be more intuitive, versatile and security ready, both with respect to technology as well as standards.
The NFC Ecosystem – Key Stakeholders
The kind of stakeholders involved in successful adoption of NFC are disparate & have to ideally come together to make this dream a reality. The diagram represents key stakeholders for successful implementation of NFC:
Some of the key challenges worth mentioning here include: consumer adoption, merchant adoption, standardization, and interoperability and last but not the least, the evolving business models such that the players/stakeholders are working with and not against one another.
The year 2011 was indeed pivotal for advancements in NFC. We saw the launch of Google wallet, the commitment of handset manufacturers and credit card companies behind ISIS and the cooperation of NFC reader manufacturers like VeriFone, which started building NFC into all of its new payment terminals. Payment gateway players such as Visa are also getting involved & taking the lead to explore NFC. Though currently there are only two cards that are NFC enabled, Citibank Master Card and a prepaid card issued by Google, but others are expected to follow soon.
NFC beyond Mobile Payments
NFC is way beyond mobile Payments. The general association of NFC with mobile payments is perhaps due to the fact that solutions from large players such as Google, Verizon came with solutions primarily focused around financial payments. This is however now true. NFC is way beyond Mobile Payments and has business opportunities across verticals, industries & domains. Some of the popular use cases could be:
- In healthcare wherein the users have a health card which enables storing information about the patient’s health, billing & payment of insurance premium and many more use cases;
- In retail with smart shopping card;
- Features such as exchanging personal information, virtual fingerprinting strengthening security
- Mobile marketing; and many more
Challenges for NFC in 2012
The key challenges which we foresee for NFC in the year 2012 are:
1. Lack of clarity to consumer
The consumers are still lost and confused about the complete concept. For NFC to be successful a comfort level needs to be created for the consumers and they have to be convinced about security of contact less payments via NFC. Also there are variety of devices enabled with NFC technology with no standards to set interoperability across devices & merchant kiosks. This will pose as the biggest challenge and the ecosystem will have to derive standards to see NFC in the year of 2012. The biggest concern currently is “All Wallets may not work on all Devices, all Networks & all Merchants”!!
2. Market Battles
The market battle is ON! Mobile Platform’s are competing to leverage the first mover advantage, while service providers & merchants are competing to jump a leap ahead of their competitors.
3. Merchant’s Dilemma
Merchant’s dilemma is “Which Wallet to Support”! Also they will need to make a huge investment in terms of upgrading their POS systems & kiosks to enable leveraging full capability of NFC technology.
4. Profit Issue
Who is making the money, is the billion dollar question? Every stakeholder is trying to leverage as much as possible and be on the winning end. The point all the stakeholder’s are missing is, we all need to work with and not against one another to make this a win-win situation for all of us.
Future of NFC
We predict the future of NFC in years to come is extremely promising. This will however depend on how the relationship between stakeholders of NFC ecosystem evolves but all said and done, the key players involved will use all possible carrot-and-stick approaches to convince merchants to adopt NFC.
Irrespective of the challenges NFC will face, the industry will evolve with new standards to embed NFC chips into SD or Micro SD cards. We expect new type of NFC tags to store more data, NFC enabled SIM cards and SIM based NFC payment solution.
Endeavour recently hosted a Webinar on “Insider’s Insight into NFC” which provided much more details about NFC, its future & trends. The recording of the same is available here:
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