Some say NFC mobile payments will catch on slow, even with Apple involved

Lag behind Japan, other countries relates to complexity, analysts say

Reports that the next iPhone and iPad could include Near Field Communication (NFC) technology have raised the prospect that many more consumers in the U.S. will soon be able to use their devices to pay for almost anything -- a candy bar, a subway ride, a parking space, or a bag of groceries.

But while flashing a phone near a station to make payments sounds easy, it really isn't.

If NFC mobile payments were simple, the technology would already be inside mobile phones and in wide usage in the U.S., some analysts have argued. The technology became available in 2004 and is used fairly widely in Japan and Korea. And it has been deployed in several European cities, mainly for transit systems.

So why is the U.S. late to the party? Aside from the actual wireless NFC software and hardware inside a phone, NFC-based mobile payments require a collection of systems and technologies, including an electronic transaction system -- or a collection of transaction systems -- to work.

Such transaction systems would function in a similar way to credit cards that are swiped for the user's information contained in their magnetic strips.

Before Apple came along, NFC also required banks, merchants, phone makers and wireless carriers to agree on transaction fees and technical specifications that allow interoperability between phones and receivers. In other words, there is a lot of politics involved with NFC.

One of the foremost analysts in electronic payments, Bob Egan of The Sepharim Group, has noted the logjam between the various parties interested in NFC over recent years. Egan said in a Twitter post last summer that he was thrilled to hear Apple had hired NFC expert Benjam Vigier, but has been cautious about NFC growth.

"NFC in handsets is meaningless without the rest of it, including agreements between parties, infrastructure, processing procedures for data, security and reconciliation of accounts," Egan said more recently.

Those factors are already in place in the credit card world, Egan noted. Even if mobile phones used for mobile payments double in number by 2014, as some analysts forecast, the total value of the transactions they make will only be 1% to 3% of all transactions conducted via credit cards or checks, Egan said.

Egan estimated there are 230,000 contactless credit card readers in the U.S. that can read credit cards with a smart chip installed. They are installed in the U.S. at fast food restaurants and retailers, and could be upgraded fairly simply to read NFC signals from mobile phones. But he said those devices have not yet been widely used.

Jack Gold, an analyst at J. Gold Associates, said NFC won't do as well in the U.S. as elsewhere, partly because of the reluctance of consumers to have their wireless carriers act as credit card companies.

Even with Apple's potential interest in NFC, Gold said, "I still believe that NFC will not be a big success short term in the U.S., which is different from other markets," Gold said. "Mobile payments in the U.S. is going to depend on carriers and how they are perceived by end users as much as the technology on the device."

Gold predicted a slow adoption rate of the technology, although he said Apple might be able to stimulate demand through special discounts at various venues and stores.

Other analysts are more intrigued with Apple getting involved in mobile payments, noting the enormous 160 million iTunes customer base that would allow Apple to sidestep banks and carriers by connecting directly to those customers through NFC-ready phones.

Still, even without Apple, other countries such as Japan and Korea, especially, have NFC in mobile phones to pay for transit and retail purchases, but notably not for big-ticket items.

The NFC Forum, which has published many specifications for developers to use in building NFC gear, recently published a 29-page white paper (PDF document) that describes numerous uses of NFC in public transit for ticket payments and more.

The paper cites a successful trial of NFC at the BART transit system in San Francisco in 2008, where ViVotech technology enabled hundreds of commuters to ride BART by waving NFC mobile phones at the gate to gain access to the trains. Users could also use the phones to pay for Jack in the Box meals near train stations or download directions to the restaurants by flashing the phone over an NFC smart poster.

Other transit and long-range rails systems using NFC are profiled in the report, including in several cities in Germany and an NFC trial in London.

Matt Hamblen covers mobile and wireless, smartphones and other handhelds, and wireless networking for Computerworld. Follow Matt on Twitter at @matthamblen or subscribe to Matt's RSS feed . His e-mail address is mhamblen@computerworld.com .

Read more about mobile apps and services in Computerworld's Mobile Apps and Services Topic Center.

Join the newsletter!

Error: Please check your email address.
Rocket to Success - Your 10 Tips for Smarter ERP System Selection

Tags telecommunicationMobile and WirelessMobile Apps and ServicesEmerging Technologieshardware systemsfinancemobileindustry verticalsFinancial ServicesApple

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Matt Hamblen

Computerworld (US)
Show Comments

Most Popular Reviews

Latest Articles

Resources

PCW Evaluation Team

Sarah Ieroianni

Brother QL-820NWB Professional Label Printer

The print quality also does not disappoint, it’s clear, bold, doesn’t smudge and the text is perfectly sized.

Ratchada Dunn

Sharp PN-40TC1 Huddle Board

The Huddle Board’s built in program; Sharp Touch Viewing software allows us to easily manipulate and edit our documents (jpegs and PDFs) all at the same time on the dashboard.

George Khoury

Sharp PN-40TC1 Huddle Board

The biggest perks for me would be that it comes with easy to use and comprehensive programs that make the collaboration process a whole lot more intuitive and organic

David Coyle

Brother PocketJet PJ-773 A4 Portable Thermal Printer

I rate the printer as a 5 out of 5 stars as it has been able to fit seamlessly into my busy and mobile lifestyle.

Kurt Hegetschweiler

Brother PocketJet PJ-773 A4 Portable Thermal Printer

It’s perfect for mobile workers. Just take it out — it’s small enough to sit anywhere — turn it on, load a sheet of paper, and start printing.

Matthew Stivala

HP OfficeJet 250 Mobile Printer

The HP OfficeJet 250 Mobile Printer is a great device that fits perfectly into my fast paced and mobile lifestyle. My first impression of the printer itself was how incredibly compact and sleek the device was.

Featured Content

Latest Jobs

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?