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The NFC Ecosystem


Mobile Payments through NFC

Mobile Payments

The technology

From a technology point of view, NFC (Near Field Communications) might not imply a great revolution. In a nutshell, it is an evolution of the RFID shortfield technology that has been in use for years now, adding the possibility of bidirectional communications. With RFID, your device could send some data to the receiver, but no dialogue was possible, allowing for very simple, low value applications.

So being an improvement from RFID, there is nothing too fancy about it as a technology feature. Smartphones today support various types of communications which serve different purposes, like their Wi Fi support, 3G and Bluetooth. So what is NFC bringing to the party?. The main beauty might be in its own nature. It is near field, which means it has very short range, typically up to 4 inches. This has a double advantage, first, it makes it more difficult to intercept (even though it is not impossible) and secondly, it demands very little power from the device.

Finally a solution that allows communication between two devices positioned close enough in a reasonably private manner, that demands very little space and power. How is this little thing becoming the next big thing in Mobile?.

Payments, payments and payments

A number of industries are really excited about the massive introduction of this technology in our devices. Key players from Device Manufacturers, Carriers, Financial Services Institutions, Internet giants, all of them are making their moves in the adoption of this technology. Samsung is including NFC chips in their latest Smartphones, while Google’s wallet makes use of NFC chips to replace your old fashioned plastic credit card. Even AT&T, Verizon and T-Mobile have teamed to create the ISIS commerce network supporting NFC payments.

In essence, the NFC chip can communicate with the point of sales device in the merchant, transmitting the necessary information so that the payment transaction can be performed, exactly as you would do with your standard credit card. Typically there will be an application in your smartphone that allows you to store your credit and debit cards information in a secure manner, and that requests a PIN number in order to access that information, securing the usage of the virtual card stored in your phone.

These applications would also allow for your card issuer to provision your card over the air onto your phone.

So far it looks interesting and convenient, but not a killer app. Even if we consider that credit card fraud due to card cloning might be more difficult with the introduction of NFC than it is today, at least for the moment.

Payments

Payments

The real beauty

It is not that you replace the plastic, it is that a whole new channel is opened, allowing Merchants and Financial Institutions to enrich the moment of the payment and use that interaction with the customer to add value, link and increase customer loyalty.

The combination of a chip for performing the physical payment transaction and an application driving the process, is the real beauty behind the NFC application to mobile payments. Now you can have coupons or virtual vouchers delivered by the merchant to your phone at any time, that you can redeem to make part of the payment. What about promotional codes delivered to your phone?. Points redemption, loyalty cards… All become now part of the ecosystem surrounding the little chip, to make the most of every time you tap your phone to pay.

Google seems to have understood pretty well the broader boundaries of what NFC is bringing to the table, with products like Wallet and Offers, which cover the whole range of services for Businesses to make the most out of the new technology. Add this to geolocation and in-door location and you can start to explore the benefits of pushing offers to the potential customers that are on the surroundings of your store, which they can instantly redeem at the moment of payment.

Adoption

It will be some years for this technology to be massively present, with a conservative prediction being that it would be present in 50% of the phones by 2014. So we seem to be giving the first steps on this thrilling technology, both on the physical availability of the technology on our devices and on the number of applications we will see coming and sophisticating not only the payments process itself, but the whole relationship between Businesses, Merchants and Customers.

Thrilling, at the very least.

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