Monday, January 2, 2012

What Is NFC And When Will It Take Off

Although people may still be doubtful about NFC and the risks associated with it, NFC technology is already a hit in Japan, where over 47 million residents adopted the tap-and-go mobile payment technology within three years, according to an IDTechEx, Dec 2010 report. It is already available in most Japanese shops, taxis, vending machines, metro / train tickets, and even on domestic flights. The fact that Japan has a comparatively low theft rate may be one of the reasons why NFC payment schemes have taken off there. According to the report, NFC has become one of the fastest electronic device product rollouts ever. The report also estimates about 800 million Chinese acquiring contactless national ID cards by 2014. [Source - IDTechEx, Dec 2010 report ]

You will have to care about NFC technology simply because “if you’re in any face-to-face environment, like retail, or services, you’re going to see a gradual trend towards people paying by tapping their phones,” says Todd Ablowitz, a mobile-payment consultant and president of Double Diamond Group in Centennial, Colorado. Besides, “major credit-card companies have already ensured NFC technology will be backward compatible with contactless card systems currently in the market.”

"The number of NFC-enabled mobile handset shipments is projected to increase from 40 million in 2011 to over 700 million in 2016," says Don Tait, an analyst from IMS Research.

In 2008, Nokia (NOK) revealed one of the first NFC integrated mobile phone (Nokia 6212), but the market in 2008 was just not ready to accept that kind of technology. In fact, Nokia also has the Nokia 360 Play (a NFC compatible Speaker) that plays multimedia files. All it needs it a gentle tap and it is time to rock and roll.

However, things have changed now. One cannot hide the fact that NFC technology is round the corner and the public should start caring about it by the end of 2012. Within 2016, we could see it being actually adopted by most services in the U.S, thereby relegating credit cards to history. Basically, NFC is old technology that has been waiting for the right moment to become a major part of our lives. Apple and Google are simply looking for a way to cash in on the wave of conversions before that time comes. Qualcomm is already preparing its critical move from credit cards to NFC devices with a PayPal type sign-up and cash dispersal. However, the biggest bottleneck is the costs involved in upgrading the entire credit card network. It is hoped that the current Citibank Blink RFID (Radio Frequency Identification tag) payment system will support future NFC standards.

It is unlikely that NFC technology will take off by 2012. However, many mobile phones that carry the NFC-technology that ought to be launched. A definitive list of NFC phones that are being launched and that are proposed to be launched in 2012 can be found at [ ]

What are the possible pitfalls in the NFC technology?

NFC excels in the two pitfalls that likely kills a new technology - lack of consumer demand, and a poor business rationale. It is unlikely that a consumer will buy a mobile phone just because it has NFC. They would probably buy it for its camera resolution, or for its looks or because it has a pink or violet exterior. Even if NFC is inbuilt in to the mobile phones that people are buying, you cannot expect most of them to use it. There will however be a few techno-geeks, journalists, and mostly fraudsters who would likely use it. The criminals and fraudsters are likely to jump on it if there is a slightest sign of a security loophole. Hence, NFC needs to be extensively tested and monitored prior to a full-scale launch.

Although it may appear a bit gimmicky initially, the consumer needs to be educated so as to understand more. As it will standardize payments and personal information into one single entity, I just am not sure how that will help people to safeguard their stuff, among all its other advantages. If someone wants to steal your stuff, getting your phone seems to be the ultimate key to ownership of everything you have. Your credit cards details, your information, entrance into your hotel room, house and eventually steal your belongings. To top it all, if you by chance happen to drop your NFC mobile phone and break it, you are likely to be homeless until someone can recreate all your accounts.

Why is that the Near Field Communication technology so important?

NFC or Near Field Communication is old technology that has been waiting for the right moment to become a major part of our lives.

·         A mobile phone with NFC technology can not only read credit cards, but can also provide a serial number, like an UPC or barcode. This will convert your mobile phone to a contactless credit card and enable you to sell to anyone with a contactless credit card. In simpler terms, a NFC device cannot only dispense money but can also make buy items.
·         NFC supported mobile phones just need to touch each other so as to exchange reader-to-reader information over the Near Field Communication interface. That is to say, a NFC device can eventually replace your wallet that contains digital money. However, it would take some time before this happens, as market standards needs to be developed, and NFC devices must be freely available before any innovation takes place.
·         It is the banking industry that would greatly profit from the NFC technology. Banks would rather opt for internet banking or ATMs as these facilities reduce banking overhead costs considerably. Banks would love if you use your mobile phone to withdraw money from your bank account and move it into your NFC-mobile wallet. Therefore, it is natural that Banks would want NFC, as it would reduce their costs massively.

What is the future of NFC?

The future for NFC technology is certainly bright! This has been further fuelled by some optimistic-sounding predictions by analysts;
·         Global NFC m-payment transactions will be almost US $50 billion worldwide by 2014 (Juniper Research, June 2011).
·         Almost 300 million or 1 in 5 or smartphones worldwide will be NFC-enabled by 2014 (Juniper Research, April 2011).
·         NFC will be 32.8 percent of global m-payments transactions – estimated at US $1.13 trillion – in 2014. Volume shipments of NFC phones are expected in Western Europe and North America in 2011 ( IE Market Research, July 2010).
·         There will be 169 million users of mobile contactless payment in China in 2013. Total number of m-payment users will be 410 million, making China the largest m-payments market in the world (Celent, Nov 2010).
·         NFC Chip Makers predict there will be at least 40-50 million NFC mobile phones on the market by 2011, based on orders for NFC chip sets (NFC Times, Oct, 2010).


Much as we are aware of NFC, it must be remembered that credit cards took nearly 30 years to take off. Hence, a new technology like NFC needs about five to seven years to establish itself. SMS was launched by Orange sometime 1994, but it took nearly four years before it really took off. Likewise, mobile email, Bluetooth and others hung around for a few years before the public accepted it. It may not be the technology that is keeping people off the NFC technology, but it seems to be the fear of compromising all their personal information and the likelihood of theft.

As of now, except for Japan, NFC is still an uncertain business technology. Perhaps with over a period of time, say over five to seven years, NFC might turn out good someday, but not until they find a better way to secure the data and make it convenient to use.

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