NFC: from near miss to near indispensable

Near Field Communications will help make a cashless Olympics possible. George Malim looks ahead to assess the wider applications of the technology and finds a portfolio that ranges from receiving money to loyalty schemes

NFC: from near miss to near indispensable
Near field communications (NFC) are seen as a great way for operators to provide users with additional functionality and could replace the traditional wallet for low cost payments on things like parking, coffees and buses.

However, while deployments to date have centred on micro-payments and ticketing, NFC now has the potential to be used for far more.

If the analysts have got it right, the technology is capable of going beyond the limited set of applications that it has addressed up until now. Analyst firm Juniper Research predicts that the gross global NFC transaction value is set to exceed US$110bn by 2014. And, with flagship projects such as the London 2012 Olympics committed to the technology, the point at which NFC extends out of its established comfort zone and addresses enterprises and consumers with a raft of new applications could finally be upon us.

'NFC as we see it can support many different services,' explains Werner Reiter, spokesman for public relations company Mobilkom Austria. 'The benefit is simple and clear - you can use NFC for service initiation. This can be purchasing and validation of train tickets, as we have shown in a pilot project with Austrian Federal Railways, but it can be mobile time recording as well.'

The operator has recently launched a business product for time recording using mobiles or NFC cards aimed at enterprise users. The carrier has built a special NFC box with an HSPA (High Speed Packet Access) module to enable the service. 'What we have learned so far is that usage of services increases by four times when NFC is used for service initiation,' adds Reiter. 'The next step will be towards chipcard services such as credit and debit card payments or loyalty cards.'

Mobile gadget
Paul Makin, principal consultant at Consult Hyperion, also sees far greater scope for the technology. 'NFC is about much more than just payments,' he says. 'This technology will place the mobile phone at the centre of our lives and become entirely ubiquitous, supplanting every other device or gadget.'

Makin says applications include the obvious such as payment cards and travel cards, where he sees transaction values starting to rise, but also less obvious applications. These include corporate access cards to replace staff RFID cards, which are costly to issue and maintain. 'The NFC phone can also be used to accept payments as well as make them,' he adds. 'For example, a small business could use the phone as its payment terminal, accepting payments from contactless cards and other NFC phones without the need for a dedicated point of sale device.'

Other applications for NFC include service discovery and coupons, areas that Neil Garner, chief executive of Proxama, thinks have great potential. Indeed, ARPU from retailing NFC coupons and smart posters is expected to exceed ARPU from NFC payment transactions by 2014.

'There's a lot of interest in how you get coupons from the online world into the physical world using existing infrastructure and avoiding paper coupons and barcodes,' he explains. 'NFC does just this and, if a retailer has a contactless reader, they can accept coupons or vouchers from an NFC handset with a very small change to point of sale software.

'Service discovery is based around smart posters, which are ordinary posters with an RFID chip attached,' adds Garner. 'Users simply tap their phone on the tagged area and it is redirected to a WAP site where they can download content or a coupon.'

Restricted access
However, two major limiting factors to NFC's wider uptake remain. Availability of NFC-enabled devices is poor and the technology is dependent on the wider deployment of NFC readers if it is to reach critical mass.

'The only constraint is availability of a sufficient portfolio of NFC handsets in the near future,' says Reiter.

Garner at Proxama cites the same problem. 'Currently, only Nokia has a commercially available handset and operators say they need a choice of models before they'll offer new services,' he says. 'There are also issues for services providers such as banks, concerning the customer experience. For example, what happens if a customer gets cut off by their operator, but the bank still wants them to be able to make payments via their phone?'

Despite this, there is an interim means of enabling devices. 'We have worked with TwinLinx and TranZfinity who have created NFC stickers that bring functionality to non-enabled handsets,' says Eric Lemaréchal, COO and co-founder of Mobile Distillery. 'This is just a short-term solution in our view and will be an interim answer for the next two to three years. We fully expect native NFC phones to dominate the market by 2014.'

Business model
Lemaréchal's view is consistent with Juniper's predictions, which foresees one sixth of global mobile subscribers having an NFC-enabled device by 2014.

Makin cites a further barrier - power. If your battery runs out, so does your purchasing power. 'When my phone dies, I can't get lunch and I can't get home,' he says. He also has concerns over NFC business models. 'The main thing holding up NFC has been the delay in thrashing out a viable business model. This appears to be coming together now as the operators and the banks are working towards reality, with neither group trying to exclude the other. I think we can expect to see significant progress during 2010.'

These developments will be critical to the success of NFC. Its deployment has been stunted as the various players in the value chain fight a divisive battle over notions of controlling the market. Those may now be starting to be put aside but different philosophies still exist from service to service. 'The role of the operator differs from
service to service,' explains Reiner. 'For some amenities, the mobile operator can be the service provider but for others, the chipcard service will be provided by a third-party and the operator will supply over-the-air [OTA] functionality. And for some services, the operator will simply provide the Sim space.'

Christian Steinborn, head of European operations at NeoMedia, thinks operators will have more of an intermediary or ancillary role in NFC's introduction. 'Direct businesses such as card companies will be the influencers,' he says. 'Companies such as Philips - which produces chips - and Visa will be driving this, controlling the back end. Operators will jump onto this train as soon as they see a strong business case for it.'

Distant reality
Makin believes the operator's role is far more defined and suggests there's already a case for NFC from the operators' perspective. 'The networks are the owners of the Sim card, so they will always be the gatekeepers,' he says.

'They will be driven towards leasing access to part of the Sim to third parties to generate additional revenue. Perhaps these third parties will be banks or other application users, but it is far more likely to be service managers - essentially third parties - that are trusted by both the operators and the banks. Transport operators provide the valuable service of being a single point of call for a bank, for example, with the added bonus that it does not matter which operator their customer is with.'

If Makin and Juniper's views are right, the next five years will see NFC capability move from a niche market to a highly popular means of
Written by Wireless magazine
Wireless magazine

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