What Is NFC — and Why Should Smartphone Users Care?

Near field communication smartphones allow consumers to make secure, speedy purchases by placing their handsets within four inches of any NFC-reading device. Yet, widespread adoption of NFC payment technology in the U.S. has proved elusive. nfc 2Despite the lag, Todd Ablowitz, a mobile-payment consultant and president of Double Diamond Group in Centennial, Colo., predicts that the infrastructure needed to support mass adoption of the technology is about to reach critical mass.

“Why should businesses care about NFC technology? If you’re in any kind of face-to-face environment, like retail, or services, you’re going to see a gradual trend towards people paying by tapping their phones,” Ablowitz says.

Major credit-card companies have already ensured NFC technology will be backward-compatible with existing contactless cart systems currently in the market, Ablowitz says. “So now all the readers that are in the market will work with those — whether it’s a MasterCard or a Visa or American Express or Discover — all four brands.”

If credit card companies are ready for NFC payment processing, and merchants would likely welcome a means to reduce lines at cash registers, what’s the holdup? A dearth of mobile phones with NFC cards is one cause (here you can find a list of available phones that currently support NFC), but Don Tait, a senior market analyst with IMS Research, expects NFC-enabled phone shipments globally to increase from 40 million to 700 million over the next five years.

NFC technology is already a hit in Japan, where 47 million residents adopted tap-and-go mobile payment technology within three years, according to a February 2011 press release from Research and Markets. It has become one of the fastest electronic device product rollouts ever, according to the IDTechEx report, “NFC-Enabled Phones and Contactless Smart Cards 2008-2018.”

Ablowitz agrees with Tait and says two developments underway will turn the tide. The first one is the recent formation of ISIS, a joint venture between AT&T Mobility, Verizon Wireless, and T-Mobile USA.  Seven of the world’s leading mobile device makers — including HTC, LG, and Samsung Mobile — will add NFC functionality to their phones, implementing technology standards across the seven phone manufacturers. Kouji Kodera, chief product officer for HTC, said his company anticipates “tremendous opportunities for consumers and merchants as we move beyond traditional payments to a future of NFC-enabled mobile commerce.” Of special note: Apple’s iPhone 4S is not NFC capable, but one analyst expects the company to include it in the next iPhone release.

The second factor is Google, which Ablowitz says is betting big on NFC phone-payment technology. Google’s Android Platform has captured over 40 percent of U.S. smartphone market share. Ablowitz says the growing popularity of Android, with its ties to Google, increases the odds that “as a small-business owner, you may get approached by Google, or you may choose to approach Google. And, if you think about how many consumers Google touches today, because of their Android handsets, if they get a whole bunch of consumers, millions of consumers, in your city, who have this wallet, [Google] can make available to you the opportunity to send coupons, or discounts, or offers for promotions to those mobile wallet handsets.”

About Jan Fletcher

Jan Fletcher, President of Dreamcatch Creative, reports on restaurant operations, the signage industry, and composite manufacturing. She also writes about technology in business and education, and is passionate about microenterprise.
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