NFC buzz at Mobile World Congress: the death knell for cash?

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P MOBILE.gifAfter Android tablets and miniature femtocells, NFC was the next big theme of MWC in Barcelona last week. It looks like finally, 2011 could be the year of mobile contactless payment.

There’s a good round-up on Enterprise Briefing this month. To summarize, the iPhone 5 and iPad 2 are dead certs to feature a near field communications (NFC) chip. Android 2.3 (Gingerbread), Samsung’s Bada devices, all Nokia smartphones and most Blackberry models will feature NFC during 2011. iSuppli believes that 220 million NFC handsets will ship in 2014

With this much vendor support, it is a sign that NFC is perhaps reaching a tipping point. The technology has been around for some time, but handset vendors have been reluctant to add an additional chipset for no reason. They’ve need a firm commitment from operators that they plan to launch NFC payments.

And this has happened. The GSM Association announced that many of the world's leading operators intend to launch commercial NFC services in select markets by 2012. These include América Móvil, Axiata Group Berhad, Bharti, China Unicom, Deutsche Telekom, KT, MTS, Orange, Qtel Group, SK Telecom, Softbank, Telecom Italia, Telefónica, Telekom Austria, Telenor and Vodafone.

And two operators, Japan’s NTT Docomo and Korea’s KT, have agreed a cross-boarder NFC service for 2012. The services will be interoperable, allowing each operator's subscribers to use a range of NFC mobile payments, mass transit ticketing and promotional couponing services offered in each country.

Death of cash?

So it’s been a long time coming, but finally we can ditch our wallets for good. No more coins clanging in the pocket. Or is it a little premature to announce the death of cash?

Before we can say that this will be the year that NFC takes off, maybe we should listen to the other stakeholders – me and you. According to a survey by Vision Critical, around half of UK consumers are uncomfortable with the thought of contactless payments with a mobile device. Perhaps banks, operators and Apple will be able to educate consumers that mobile contactless payment is no more insecure than using a credit card.

And there is the issue of payment costs. To date, Visa and Mastercard clearings system have been more suited to higher cost transactions which require a second layer of authentication (a PIN). With mobile contactless payment, the goal is to have touch-and-go payment for items less than €20.00, without needing to key in a PIN. Will this high volume of transactions overwhelm the payment clearing processes? Can merchants afford the transaction fees?  I am sure that all this will be sorted out in the coming year or two. For instance, in the UK, Visa has cut the costs of a contactless debit purchase between £2-£10 to a flat £0.04 per transaction. Certainly, the larger chains of retail outlets are on board as they want to rid their stores of coins.

Another key issue is the long lifecycles of smartphones, with customers typically on 18-24 month contracts. So even early adopters may be locked into their NFC-less handset for another two years. This means it might take up to five years before contactless payment (and other NFC services) are mass market among early adopters and laggards.

One way to accerealte take-up is to retrofit existing devices. At Mobile World Congress, Visa demonstrated technology from partner companies such as NFC embedded on a micro-SD card. For phones without a micro-SD slot, such as an iPhone, Visa showed a NFC “jacket” for iPhone from DeviceFidelity. These are good ways to extend the NFC footprint to the installed base of mobile phones. The only question is, who will pay for it?

Stewart Baines

I've been writing about technology for nearly 20 years, including editing industry magazines Connect and Communications International. In 2002 I co-founded Futurity Media with Anthony Plewes. My focus in Futurity Media is in emerging technologies, social media and future gazing. As a graduate of philosophy & science, I have studied futurology & foresight to the post-grad level.