More NFC applications needed to drive mobile wallet revolution
Mobile payments on their own are not enough to drive adoption of the technology
Near-Field Communication (NFC) was one of the major themes of this year's Mobile World Congress in Barcelona, with a broad range of smartphone makers – including Nokia, Samsung, Blackberry and Huawei – announcing new products that take advantage of the technology.
But the promise of NFC has been around for some time, and anyone who has been following the progress of the technology over the past few years will be forgiven if their enthusiasm is beginning to wane. Retailers, banks, mobile operators and device manufacturers are all desperate to get NFC into the mainstream, but so far consumers just aren't biting.
Part of this could be down to the fact that so much of the focus of NFC is on mobile wallets. The idea of mobile wallets is that eventually we won't need to carry plastic cards and cash around with us, because we will have digital wallets on our phones, and we will be able to pay for items in shops simply by touching our devices to a point of sale (POS) terminal.
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While this may seem like an attractive proposition, the reality is that mobile wallets are extremely difficult to get right. As Ovum analyst Eden Zoller pointed out in one of the sessions, most transaction sizes are small, revenues are often shared between several players, and margins can be further eroded through transaction processing fees.
To add to the confusion, mobile wallets can be implemented in a number of different ways, using a variety of enabling technologies. This makes them confusing for merchants, who are trying to work out which types of solution they should invest in, and also alienates consumers, who don't see why they should forego existing payment mechanisms.
Interestingly, when I visited the 'NFC Experience' at MWC, there wasn't a mobile wallet in sight. Instead, I walked around three stands, all of which were showing off completely different uses of NFC technology.
The first company, Israeli start-up Tag-a-Bag, was demonstrating an NFC-based travel service that uses luggage labels equipped with NFC tags to help travellers manage their journeys. The service allows users to track lost luggage, access travel plans, post news of their safe arrival to friends and family via social media, receive offers and create a log of their travels.
The second was UK-based firm Intercede, which has developed a solution that enables an NFC-equipped mobile device to act as a contactless smart card. Using SIM-based NFC and the secure element on the phone to store encrypted graphic credentials, enterprise employees can use their smartphones to gain physical access to buildings or as a flash badge for identity verification.
The third example showed how an NFC-enabled phone could be used as a boarding pass in an airport to access security, the lounge and the boarding gate. The boarding pass is sent to the phone as an SMS and stored on the SIM, so that even if the phone is switched off, the user can verify their identity and flight details by touching their phone to a terminal.
All of these seem like interesting and genuinely useful examples if mobile NFC that will not only appeal to consumers but also businesses users. They show how a technology that is already built in to most smartphone devices today can be used to improve the efficiency of everyday actions.
This got me thinking that maybe the whole obsession with using NFC for mobile wallets is misguided. There is still an awful lot of work to do before using phones to pay in shops becomes ubiquitous – not least because many people are quite content to continue using SMS or USSD for mobile transactions.
Meanwhile, using NFC to transmit small amounts of data between devices, such as sharing contacts or playlists, is genuinely capturing people's imagination. Once this functionality transfers itself the the enterprise, the potential uses of NFC become a lot more exciting.
Even the companies working in the NFC mobile wallets industry have been forced to acknowledge that it is a tricky market to conquer – primarily because there is very little friction in the payments system today. Most people are quite satisfied with their experience of making purchases using a plastic card.
Realising the mobile wallet vision therefore means creating 'added value' for customers, beyond the transaction itself. This means creating new and compelling applications that complement the payment process – whether by offering rewards or improving efficiency.