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.'
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.'
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 LemarÃ©chal, 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.'
LemarÃ©chal'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.'
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