NFC Should Stand For “Needs Further Clarification”

Written by Nick Holland
September 30th, 2010

Nick Holland has spent the last decade covering the intersection of the mobile and payments industries. He currently covers all things mobile transaction related at Yankee Group.

Near Field Communications (NFC) is the latest means by which the payments industry is attempting to force a new technology into an old role—that of payment card. Furthermore, the acronym is being used to rebrand existing payment initiatives that only scratch the surface of true NFC capabilities. The real danger here is that the larger NFC value proposition might be poisoned if NFC is pigeonholed as just another card replacement. If that happens, it would effectively kill retailer and consumer adoption.

The adage “if all you have is a hammer, everything looks like a nail” is an apt description of current payment industry thinking. What is the most obvious use of contactless technology? Payment card. What does everyone want their phone to be? Payment card. What is your favorite color? Payment card.

NFC is a short-range radio frequency technology due to be embedded in a mobile phone near you—all going well—sometime in the next couple of years. Three specific modalities define the technology.

  • Card Emulation Mode: It can replicate the functional capabilities of payment cards, mass-transit ticketing cards, building entry cards and others.
  • Reader Mode: It can grab information from NFC tags that can be used to run applications, visit Web sites, call folk, turn on your toaster oven or accomplish any other number of actionable events via a mobile phone.
  • Peer-to-Peer (P2P) Mode: It can link to other NFC devices in much the same way as Bluetooth currently does but has greater security. Hence, more valuable information can be shared between communicating devices.

The real capabilities of NFC will come from the integrated trifecta of these modalities—card emulation, reader mode and P2P. With this integration comes an entirely new way of interfacing, with NFC essentially hyperlinking the physical world. It could also extend interactive data capabilities to the less tech savvy, who would no longer need to launch apps themselves but be able to tap the phone on a tag to get information on local weather, order a pizza or any number of otherwise underused data features.

Although payments will be a component, the broader value proposition is having a device that can easily facilitate a rich overlay of the world we live in—a truly augmented reality facilitated via mobile devices.


7 Comments | Read NFC Should Stand For “Needs Further Clarification”

  1. Rob Rice Says:

    Great points. NFC is beginning to look a lot like biometrics. Use you finger (or in this case NFC sticker, or NFC phone chip) and “leave the wallet at home”? Never going to happen. You still need your driver’s license for ID whether you drive to a store or not. Until retailers or card brands pay the extra expense to fully deploy NFC readers in the store, we are forever left with “chicken & egg” dilemma and still no consumer adoption. Also, I saw a report on thieves using cheap NFC readers on the street, waving them past purses & wallets to capture embedded card info for malicious use. Even if NFC becomes the golden goose, consumers are still going to cautious. All the attempts are great, but someone needs to invest more heavily before we all see a newly born chicken from that egg.

  2. NFC user Says:

    Nick, Excellent point – if not an obvious one to those following NfC and that is that the payment angle is such a fractional part of the big value adder of NFC.

    I think to myself that surely industry companies that are known for their leadership and creativity as Apple and Google see this potential and are working on something?

  3. Nick Holland Says:

    Agreed, NFC User! I suspect we may well see a play from Apple / PayPal in this area. PayPal in particular…

  4. Peter C Says:

    Being involved in the development of NFC/Contactless terminals including the Lenovo contactless module, I have seen this exact problem happening. Also being involved with the NFC Forum, it is something that we are trying to communicate through there as well.

    I am a huge supporter of NFC and what it can accomplish by using its three modes.

    In relation to Rob Rice’s comment about still requiring your drivers licence, here in Japan the new drivers licence (and I believe the Alien Registration Cards and National Health Cards will soon have this) are all contactless cards based on ISO 14443 Type B, which is covered by the broader range of NFC (ISO 14443 A & B, JIS-X6319/FeliCa). So potentially you could use your NFC Device as your drivers licence.

    And a friend of mine once said that NFC is a woman’s best friends, just think of how many point cards/loyalty cards you could take with you when you went shopping.

    Great article.

  5. Jeremy Krahl Says:

    Good article – “Needs Further Clarification” is right. Inevitably when I use my card as contactless I get one of two responses from the clerk. I’ll usually either hear, “oh, sorry, that thing doesn’t work – let me have your card,” or they will say, “Wow, you are the first person I’ve ever seen actually use that thing.”

    I can only imagine how confused the clerk would be if I whip out a cell phone and try to tap the contactless reader with it – they will probably call security!

    There is still a long way to go…

  6. joe74 Says:

    Just two question:
    1. Peter C did in Japan already solve problem about NFC facial recognition? I mean: you can put driver license on a SecureElement on a NFC phone, but it seems to me that there is no way for a policeman to check if the secure element belongs to you except if you have an ID card with you (again chicken -egg problem) and he can check your ID with a contactless reader (but without “reading” your picture frome the SE… to long time needed for data transfer.
    2. An NFC “only contactless” payment card has the problem on how to pay or withdraw money where there is no contactless signal (POS or ATM). The only viable solution is to have a dual interface card (contact+contactless). But in NFC is not possible. So during transiton time from contact+contactles payment/loyalty infrastructure to a full contactless infrastructure, users should always have their old contact card. And it will last years. So a long way before NFC will become a woman’s best friend…

  7. joe74 Says:

    sorry, I’ve just read second page of article, so my point 2) is not necessary. Already written … :)).


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