There’s been quite a bit of buzz recently regarding the capabilities surrounding Near Field Communications (NFC). The idea behind this is that a user can be provided with a low-powered, short range (about 2 inches) wireless transmitter/receiver that can be used in a variety of applications, such as providing access control to restricted doors, airline or mass transit check-in/ticketing, and even payment methods. Google especially has upped the ante in this last department with the announcement of Google Wallet, a movement to make your phone into your primary method of payment for goods and services. While I’m behind the idea that you can start using mobile devices for electronic payment, I think that the NFC idea isn’t quite ready for prime time just yet.
1. NFC-enabled devices are few and far between. The list of devices that have built-in NFC transmitters is longer than expected…provided you live anywhere other than the United States. Most of the phones that have NFC chips are Nokia devices primarily marketed in Europe. The main devices found in the US are (naturally) the Google Nexus S and to my surprise the Blackberry Bold/9900. While I’ve been told the boys in Mountain View make a mighty nice phone, the adoption rates aren’t nearly as high as other devices from Motorola and the Fruit Company Mobile Device Company. In fact, rumors that the iPhone 5 *might* include a NFC chip had people foaming at the mouth. Why’s that? Well, despite what others might tell you, putting a new technology in the next iPhone is a good way to push it toward the mainstream. This may not guarantee that it will be adopted, but based on the sales numbers that the iPhone usually produces, putting a NFC chip in it would get it to several million people in short order. Once the technology is more pervasive than a few hundred thousand handsets, I think there’ll be more effort given to incorporating it into payment methods. Otherwise, it will sit unused, taking up valuable space in your phone that could have been used for a bigger battery or a fancy gyroscope.
2. NFC-enabled retailers are few and far between. This is the same as number 1, except it’s the other side of the coin. Not seeing any real need to provide NFC receivers for a non-existent demand, retailers haven’t really put any in. Think back to the MasterCard PayPass or American Express ExpressPay. How many people have you seen with those cards? How many of those terminals have you seen? I’ve seen a few of the newer ones here and there, but never at any big box retailers or department stores. If Google or Apple are serious about driving adoption of this kind of technology, they may have to work with the credit card companies to underwrite the replacement of NFC-enabled POS devices. Walmart won’t spend millions to replace their terminals on a whim with the possible hope of having NFC customers, but if Google agrees to pay 25% and MasterCard agrees to pay 25%, that might be the tipping point to spur adoption. Starbucks has faced a similar issue with their mobile payment system. Starbucks began testing the use of barcodes in their mobile app to see if adoption would take off. Their testing areas, Seattle and Silicon Valley, showed that people were willing to use their iPhones or Nexi devices to pay with a virtual Starbucks card. Once they rolled out their mobile terminals across the country, I wonder if they’ve seen the same kind of adoption in places other than coffee-crazy Seattle or tech-friendly Silicon Valley. If the mobile manufacturers want to drive this technology, they may have to put their money where their chips are.
3. Who has my money? This is probably going to be the biggest problem standing in the way of mobile device NFC payment. Right now, Google Wallet works with Citi MasterCard and Google pre-paid cards. Not an impressive list of authorized cards, to say the least. If Apple were to adopt this technology in the iPhone 5 or iPhone 5GSX+++, they obviously would want the funds used to purchase things stored in your iTunes account. Whoever controls the money controls your spending habits. Think about having a number of small bank accounts, each with small amounts of money. You can’t use any one account for all your purchases due to the lack of significant funds in any one of them. Extrapolate that further. Would you really tie up, say, $500 worth of your income in an iTunes NFC payment account? I don’t think the electric company accepts iTunes yet, and you can’t really use Google pre-paid cards at a Coke machine. The credit card companies are going to be hesitant to partner with Google and Apple unless terms are favorable for them to keep getting their 2% margins (or better) and the device manufacturers are not going to want to use the technology unless they can get their cut, especially Apple and their 30% tax on anything they touch. The fight among each of these parties is likely to keep the whole thing shelved for the foreseeable future, unless some kind of breakthrough can be reached.
I think NFC has the opportunity to be a real game-changer for Personal Area Network (PAN) applications. An example, if you will. Those that have played the Metal Gear Solid series of games no doubt remember the annoyance in Metal Gear Solid 1 where you were required to be holding a door key card when you wanted to enter. In every game after that, the key cards utilized PAN technology to allow you to pass through them without the need to select them every time. NFC-type communications at it’s best. Now apply those lessons to the real world. Your phone can replace your access badge. Your phone can unlock the front door to your house. You can use your phone for a boarding pass or a parking meter fob or any one of a number of cool futuristic things. Yes, even a payment method. However, there are enough challenges to make adoption difficult at best. Everyone wants to lock you into their particular flavor of NFC banking to best help you find ways to spend your money. Until we get some kind of universal access or centralized clearinghouse that all the interested parties can agree on, I don’t think NFC will be replacing my wallet any time soon. Let’s hope time proves me wrong on this one.