NFC or Near Field Communications is a form of mobile payment which turns your smart phone into a virtual payment wallet. An NFC smart phone will allow the consumer to have all of their payment options available to them right on their phone; just choose your form of payment, tap and you’re done. The industry hype concludes that tapping your phone to pay provides a better consumer experience than digging in your wallet or purse and then swiping your credit card through a terminal.
The big buzz is that this technology will bring real-time, personal merchandising and loyalty through its capability of also holding your personal stuff like, admission tickets, gift cards, coupons and other loyalty cards. This will be great for the consumer since they will have less paper and plastic to keep up with. There are other applications that could be developed (and some are currently in the works) such as:
- Train, planes and other transportation fares
- Monitoring health
- File sharing between phones (photos, music and documents)
- Unlocking doors in cars and hotels, etc.
- Storing offers & promotions
So, why aren’t we using this new technology right now!
Mobile payment has been well adopted in many parts of Europe and Asia but it is not taking off as quickly in the US.
Both devices need to have NFC chips and antennas. Phone manufacturers don’t want to add the additional cost of NFC hardware without knowing it will be accepted by consumers, this is slowing down adoption in the US.
Merchants are skeptical since there are a limited number of hardware options for the consumer to purchase stuff on. Currently, in the US, you must have a Samsung Nexus S or Nokia Astound to have NFC chips and antennas factory installed.
By 2015, it is estimated that 30 percent of all phones globally will have NFC capabilities built in. This will probably result in consumers seeing more adoption of NFC from merchants. The major players in NFC hardware/software are Google, Nokia, ISIS, MasterCard and Samsung/Visa.
Is there a downside?
Everybody knows software crashes, batteries die and hardware has glitches. It will be hard to convince consumers to leave their home without backup, like photo ID, licenses and credit cards.
Security is going to be the top concern for consumers. Fear of hijacked mobile payments has kept NFC from early adoption. Consumers have seen the downfall of other venues that house personal information; how will consumers know that their credit card and personal information isn’t getting hijacked every time they tap their phones?
There are still a lot of wrinkles that need to be ironed out in regards to NFC technology. Banking institutions and vendors will have to make security its top priority. The support of the US merchants and the phone carriers will have to be sorted out. The facts are, NFC technology is coming and you will probably notice the impact within the next five years, whether you participate or not.