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Will NFC live up to the hype?By
A group of industry experts weighs in: Will NFC live up to the hype and help contactless mobile payments and marketing technologies such as smart posters reach the mass market?
For years now, attendees at mobile conferences have been hearing about the transformative, revolutionary impact that NFC will have on mobile marketing and commerce—especially by enabling contactless mobile payments and loyalty/gift card redemption at retailers’ point of sale. However, for that vision to become a reality, an NFC chip must be preinstalled in most mobile devices, which will probably not happen until 2011 at the earliest.
“Everyone is asking, ‘Where are the NFC-enabled phones?” said Damian Balsan, director of business development at Nokia, Espoo, Finland. “They are coming very quickly, because NFC is all about ease of use, enabling a simple experience and providing consumers with the ability to do something in one tap instead of two or three or four.
“That has enough value added for all of the stakeholders—the carriers, applications providers and other partners in the ecosystem,” he said.
“The first thing we’re focusing on is one-click access, which solves a lot of issues.”
One issue it could solve is application discovery. With hundreds of thousands of applications, it can be very difficult for a consumer to find applications they are interested in, and there is a huge market for advertising because brands and publishers want to make their application visible.
With one tap, an NFC-enabled mobile phone could download an application or other types of mobile content from an RFID-enabled smart poster.
“For that you need this connection to the physical world, and NFC can bring that via a one-tap experience,” Mr. Balsan said.
The barriers to a commercial roll-out appear to be disappearing. For one, many nationwide chains in the quick-serve-restaurant, convenience store and pharmacy segments have already installed NFC/RFID contactless readers at the point of sale.
In addition, the cost of preinstalled NFC chips, which enable contactless mobile payments, customer relationship management initiatives and content distribution, has gone down dramatically, according to Nokia.
“To enable these types of use cases, it is far easier to implement NFC than a 2D bar code, where a consumers has to download and open the app, use their camera, etcetera,” Mr. Balsan said. “For a lot of people who are not early-adopters, if you have to do more than one gesture, they’re not going to do it.
“You will be able to put these tags onto objects for advertising, mobile authentication and high-value items—you can tap onto these items to download content or make a payment,” he said. “You can copy a 2D bar code, but can’t copy a secure chip.
“NFC gives mobile devices contact the with physical world, and will enable you to exchange other things, from games and digital content to gift cards, business cards and social networking information.”
While the various marketing and CRM applications of NFC are compelling, the most interesting application for retailers is contactless mobile payments, which provides the ability to close the loop on mobile marketing and advertising and encourage impulse spending.
“The end game for NFC is mobile payments, and POS contactless readers are really taking off in U.S.,” Mr. Balsan said. “Once you create enough compelling business cases, simple things, five years from now it’s really going to be huge.
“In 12 months, we’ll really see NFC-enabled handsets from different makers, state-of-the-art handsets with all the latest NFC technology,” he said. “Number two, we’ll se very simple applications, one-tap payments, single-click transactions that will delight customers because they are so easy.
“Number three, I believe carriers will deploy NFC commercially, and I mean real commercial deployments.”
NFC makes phones smarter
Randy Vanderhoof, executive director of the Smart Card Alliance, Princeton Junction, NJ, outlined NFC’s core applications: connecting, accessing and transacting.
NFC lets consumers set up wireless home office connections, access buildings and events and touch their camera to a printer to print photos.
As for access, NFC lets consumers’ handsets read smart posters and download content, as well as share business cards.
NFC enables contactless transactions, letting consumers use their phone to pay for goods and services, for example buy tickets for concerts, sporting events and transit access to trains, planes and buses.
NFC-enabled phones will take the place of NFC/RFID-enabled credit and debit cards.
In terms of marketing applications, NFC can enable two-way communication between retailers and consumers, passing information back to consumers’ mobile phone via a POS contactless reader.
Retailers can provide consumers with loyalty points, mobile coupons, a receipt or an SMS/MMS message, all with a single tap.
There are many different means of mobile payments, and all of these forms of payment will ultimately coexist on the same device owned by the same consumer, two in the virtual, digital world and two in the physical world.
The industry has experiences a lot of traction for the purchase of virtual goods less than $10 that are billed via the carriers, a good growth business strong demand.
The second is using the mobile as an extended channel for ecommerce, with payments via the mobile Web or an application.
“Where we come in is the two segments in the physical world, payments in bricks-and-mortar physical locations and SMS payments, developing economies where there’s no existing payments infrastructure, which is very difficult to scale and apply in North America and Europe,” said Michael Mullagh, CEO of Vivotech, Santa Clara, CA.
“Mobile contactless payments, putting NFC/RF chips in phones and making payments with those phones at the POS, has huge potential in developed countries,” he said. “The infrastructure required to make mobile payments work applies to a huge emerging market.
“We’re seeing contactless mobile transit payments in Europe, and we will see it soon in North America.”
The spread of contactless readers at the point of sale, letting consumers download loyalty card points, mobile coupons and virtual tokens over the air enables one-to-one marketing relationships.
“It is nirvana for retailers in the U.S.,” Mr. Mullagh said. “They can send a real-time over-the-air message while a consumer is shopping, who is registered via interaction with a smart poster or GPS positioning.
“NFC enables dynamic, personalized marketing, which is a huge consumer benefit, as well as a huge retailer benefit, reducing costs and making marketing more effective,” he said. “We ran a trial with Citi, Vodafone and Nokia for mobile couponing and payments leveraging NFC technology, which was highly successful.
“We found mobile contactless payments usage to be four times higher than contactless card usage.”
Vivotech is seeing significant movement underway in the NFC/RFID space driven by security mandates, which are causing retailers to change out all customer-facing PIN pads by August 2012.
“Retailers are asking themselves ‘What is the incremental cost versus the incremental benefit of commercial NFC capability?’ and NFC just makes sense for them,” Mr. Mullagh said. “We think there’s going to be very significant growth in the contactless reader base due to the PIN pad mandate.”
Sharing the wealth
NFC/RFID technology is here, and it works extremely well.
The problem is getting the various players in the ecosystem, from the banks, credit card issuers and payments processors to the carriers and mobile vendors, to play nice a figure out a revenue-sharing model everyone can live with.
“NFC is one way to do both online and offline transactions, but there are a number of players involved in deciding how this ecosystem evolves, and pretty much everybody has a different view, so it’s complicated,” said Dr. Siva Narendra, cofounder and chief technology officer of Tyfone Inc., Portland, OR.
“NFC technology works great, but there are business-model problems—handset deployments, who’s paying for it, who’s investing in it?” he said. “There is no such thing as a few handsets—there has to be mass deployment of NFC and strict security standards.
“Mobile brings online and offline in one device, therefore both ecosystems will determine how and when NFC is deployed to the mass market.”
Future so bright
In the next two-to-12 months, we can expect to see a lot of NFC-enabled mobile devices coming out, according to Gemalto. That will open up a whole new world of possibilities for merchants and marketers.
“We see NFC as a huge opportunity to create a market that we don’t really know today,” said Jean-Louis Carrara, Montgomeryville, PA-based vice president of business development for North American telecommunications at Gemalto.
“There will be some NFC applications we haven’t even thought about yet, so how can we put in place an infrastructure that is secure enough for banks and transit authorities to be comfortable with, and so that consumers trust the security of NFC,” he said.
“Interoperability between devices and secure elements is still being worked out, but the convenience proposition of NFC is already in place.”
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Tags: contactless mobile payments, Damian Balsan, Gemalto, Jean-Louis Carrara, Michael Mullagh, mobile, mobile commerce, mobile marketing, mobile payments, mobile retail, near field communication, NFC, Nokia, Randy Vanderhoof, RFID, Siva Narendra, Smart Card Alliance, smart posters, Tyfone Inc., VivotechYou can leave a response, or trackback from your own site.