Woman paying using mobile phone

NFC in mobiles vies for adoption beyond payments

Embedding NFC payment schemes in mobile phones is still a way off. In the meantime, E&T finds plenty of applications for these short-range radio tags.

For several years in the Finnish city of Oulu, if you could touch it, you could tag it. Tagging technology turned up in schools, parking meters and shopping catalogues. Elderly residents could touch a mobile phone to a menu card to order their meals-on-wheels service for the day, instead of phoning in. The city's department of education let workers use their mobile phones as office keys. And children at Hintta primary school didn't have to shout out when it came to taking the register each morning, instead checking in by touching their name badges to the teacher's mobile. The enabling technology was the near-field communication (NFC) protocol.

'We like to think of our city as the city of NFC,' said Outi Rouru-Kuivala, project manager for the SmartTouch project in Oulu, when the projects reached their peak in 2008.

Heard but not seen

It's not hard to come up with uses for the NFC protocol. Yet, outside Japan, the technology has barely got beyond the trial stage.

Reuben Foong, research analyst for Frost & Sullivan's Asia-Pacific smartcards practice, claimed late last year that NFC is 'often heard but seldom seen by the end user'.

NFC enthusiasts cite Japan as the example to follow in the development of NFC as a mass-market phenomenon. But industry analyst Celent warned last month that the situation for NFC in Japan is not quite as rosy as it seems, particularly in the area of payments.

According to Celent, some 28 million payment accounts have been registered in the country so far on handsets that support 'osaifu keitai', a system based on Sony's Felica cards, the company's forerunner to NFC. That's about a quarter of all contactless payment accounts in the country.

The lessons from Japan are unlikely to make financial institutions rush to support contactless payments on mobiles. Celent analyst Red Gillen says several companies without any previous experience in financial services have muscled in on mobile payments. He claims: 'Japan shows that non-financial institution disintermediation in the payments space is a real threat.'

Alex Kwiatkowski, principal analyst for financial services technology at Ovum, argues that banks in the West need not worry too much about NFC support. The problem for the contactless technology is convincing people they want what it can do.

'It's not like the introduction of debit cards, which rendered irrelevant almost overnight the writing of cheques,' says Kwiatkowski. 'For contactless, there is not a lot of consumer demand, or even consumer awareness. All of the promotion of contactless is well intentioned, but misplaced. They need to get users accustomed to making payments with mobile devices before putting a chip inside the handset.'

Payment schemers

A number of mobile-payment initiatives are underway, both with and without NFC chips. In June, US Bank decided to work with CashEdge to launch a mobile-payment service later this year. Similar to Paypal on the desktop, Popmoney will make it possible for handset users to send money to each other directly using their email addresses as identifiers.

Bump is closer conceptually to NFC but without the extra RF interface. The Bump system only works with devices that have accelerometers - vital to enable them to detect the collision when two handsets are 'bumped' together - and which can locate themselves. But as both Apple and Android devices have to have these things, Bump will run on a fast-growing number of smartphones.

Kwiatkowski warns against becoming too enthusiastic about the prospects of mobile-payment start-ups that go up against the big financial institutions - especially now that they are only too aware of how Paypal muscled in on their business.

'There is an emerging group of alternative payment providers, many of them with four or five-letter names. Frankly, I think they are using a peashooter to dent a tank,' says Kwiatkowski. He argues that people will most likely start using mobile payment systems from providers such as these or big banks before they comfortably move to a system based on NFC.

Loyalty programmes provide a shorter-term opportunity for NFC than relying on a massive switch by banks away from plastic cards to chips in handsets. Barclays only started upgrading its debit cards with the contactless PayWave system in the past year. And there is no reason for NFC tags to be physically part of the handset. Last year, French children's clothing store Tape - l'Oeil decided to use stickers with NFC tags embedded in them to form the basis of a new loyalty-card programme designed by specialist Adelya.

Carloman Grelu, head of European sales for Inside Contactless, which supplies the tags used in the Tape - l'Oeil stickers, says the approach allows 'customers to adapt to the idea of using their mobile phones as loyalty cards in advance of handsets that will have this capability built in'.

Gillen points out that one of the drivers for contactless payments in Japan has been the use of incentive schemes. Kwiatkowski says he could see a company such as Tesco, which has a banking licence, step into this business by combining loyalty-card systems with mobile payments - but that may not happen for a long time.

Charles Dachs, marketing director for mobile transactions at chipmaker NXP Semi-conductors, concedes that users might end up with phones covered in stickers from loyalty schemes in the same way that they have a wallet or purse full of loyalty cards, but argues that long-term consolidation into the handset is likely.

'It will be several years before NFC converges to one or two implementation types. But that is the natural cycle in technology,' he says.

Kwiatkowski argues that non-convergence may be more desirable even if it seems less convenient, pointing out that people are not necessarily going to want to rely on an easily-lost mobile for every transaction.


While participants try to sort out the tangle of competing interests in mobile payments, the manufacturers of NFC tags and chips are looking closely at applications that do not rely on the exchange of money.

'It's possible to deliver an out-of-the-box experience [with NFC]. Payment has been discussed a lot. It's not the simplest to implement because of the complex business models. But we still believe that widespread adoption of NFC will come in through adoption in mobile handsets,' says Dachs.

'One of the key differences from when we started deploying in mobile is that the mobile Internet and smartphone segment has completely exploded. These devices are really now making it much easier to show the end user the applications of NFC.'

Dachs adds that the rise of the application store for mobile operating systems makes it easy to deploy programs that make use of NFC tags that don't revolve around payments.

'Non-payment applications don't require the interactions of multiple players in the ecosystem,' says Graham. 'A strong emerging theme for NFC is in simplifying the user experience. At one level, it's a really simple function. But it has the potential to open up a host of applications.'


One of the applications used by Sagem in its Cosyphone is to help older users get to grips with mobile phones. Instead of programming speed-dial numbers or maintaining an address book, they can tap the phone on a picture frame that contains a tag. As long as someone has set up the tag to contain the number for the person on the photo inside the frame, it could be an easy way for people to call their loved ones.

'Simply touching something is an intuitive gesture,' says Graham.

Graham believes that, if the phone arrives at the user's home with a bunch of NFC stickers in the box, this can help get them used to the idea of touching objects to launch functions on the phone.

Some of the tags that turn up in the box can hint at uses in payment systems. Graham points to the idea of companies putting special offer cards into the phone's box. To activate the offer, perhaps by steering the phone's Web browser to a sign-up page, the user has to tap the phone onto the card that carries the tag.

To let people create their own tag applications, Innovision has opened a webstore from which users can order a few tags at a time. A number of open-source tools have appeared on sites such as SourceForge to help users develop their own applications for NFC-enabled devices and companies working in the field have come up with applications-programming interfaces for Android and similar mobile operating systems.

'One of the reasons why Nokia published their application programming interface was to make it easy for any developers to use this technology,' says Dachs.

So the secret to widespread adoption of NFC may not be a major push from the big banks: it might be down to you.

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