Ironing out the NFC wrinkles
Near Field Communication (NFC) could soon become a part of most people’s lives, but it’s not there yet. Although Peter Preuss, Chairman of the NFC Forum Marketing Committee points to 100 projects around the world and to the fact that a new project comes in almost every week, those projects are mostly still only pilots.
As Preuss says, “This is a young technology; Bluetooth didn’t take off in just one or two years.”
NFC is a short-range high-frequency wireless communication technology which allows exchange of information between electronic devices. It uses the same standards as Radio Frequency Identification (RFID), which means it’s compatible with existing infrastructure, but in addition, it combines the features of reader and smartcard so that real two-way communication can take place.
Opening up new worlds
NFC communication can be encrypted, and that has opened up the possibility of using it for ticketing and banking. In rural India, for example, a mobile phone contains all the villagers’ banking data, and villagers identify themselves using NFC smartcards. That way a bank “branch” can be set up for around $650, bringing financial services to rural areas for the first time.
In the Finnish city of Oulu, NFC is becoming part of daily life. For example, in a pilot project, senior citizens chose meals-on-wheels by touching phones to the tags on a menu. The message was delivered to the caterer, who prepared the appropriate meal, and the recipient touched phone to tag to confirm receipt.
Oulu project manager Outi Rouru-Kuivala says that, for a public authority, “implementing new technology must be justified by cost savings, wider provision or easier accessibility.” All three applied to the meals-on-wheels project, although Rouru-Kuivala notes that they only realized later that elderly people need larger handset screens. But, she says, “They found the technology easy, and it was good for them psychologically.”
There were also pilot projects using NFC to register attendance at school, get tickets to the Oulu theatre, park the car or get into the sports centre. A pilot with the city’s mobile technical staff showed that NFC helped them to work more efficiently and flexibly.
Rouru-Kuivala notes that the concentration of pilots in Oulu has led to a concentration of technical skills. “It’s part of the economic policy of the city,” she says, “to bring know-how to the region.” As a result, local companies themselves come up with their own NFC products and services.
All the pilots are being studied, revised and turned into long-term projects. The city has funded half the cost and it wants to see permanent benefit, but, as Rouru-Kuivala says, “that can’t happen until we have greater handset penetration.”
Most handset manufacturers have just a couple of NFC equipped models, and the gap is being filled partly by so-called NFC stickers – tags which can be stuck on the backs of phones, but which are really little more than contactless cards. And, as Peter Preuss points out, not all “NFC” stickers conform to the NFC protocols. One sticker, made by Twinlynx, provides real NFC functionality by communicating with the phone via Bluetooth.
Stickers are proving popular for loyalty schemes, where you get a sticker instead of a card. But according to Singapore-based payment expert Aneace Haddad, people are reluctant to fill out even more forms to get even more cards (or stickers), so he’s invented Taggo, which aggregates loyalty schemes on to one sticker. “You’re standing in line in a store,” he explains, “and you see an offer to join the loyalty scheme, so you just send an SMS to Taggo, and your sticker is registered.”
The advantage to the merchant is that many of the barriers to joining schemes are lifted – no forms for the consumer, and no fat wallet – and merchants do not have to administer membership details.
Although Haddad recognizes that the business will move to NFC phones eventually, he’s happy with stickers: “The business model for stickers is clear,” he says, “but mobile phone operators are greedy. Sticker manufacturers don’t say they want a percentage of my business, but operators might, so I’m watching with interest.”
Phones offer more
Jonathan Collins, NFC specialist with ABI Research, says that loyalty is increasingly important, and is an argument for retailers to invest in readers. And, until more phones are available, that’s being helped by the presence of stickers. “Stickers and contactless cards are building up demand,” he says. But the real benefits of NFC are in phones, because of their screens and their network connectivity.
He doesn’t find it surprising that handset manufacturers have moved slowly. “Handset vendors have to deliver what their customers want and their largest customers are mobile operators,” he says. “When operators are ready for NFC then we will see it rolled out in huge numbers.”
One issue has been uncertainty about the business model. Who will make the money? Collins thinks operators won’t want payment per transaction, but will offer hosting and management services. For the financial industry, the advantages will be in reducing infrastructure and handling, and in turning some traditionally cash payments electronic.
As Preuss says, the various players come from different worlds and have not talked to each other before. That gives extra significance to the new discussions on common open standards between the communications-industry-based NFC Forum, and the Mobey Forum, which works on issues related to mobile financial transactions.
But it won’t be long now before the problems have been solved and we’re living in an NFC world. Preuss says the momentum for NFC has been growing steadily and he expects it to continue. Collins suggests that, once the operators start deploying, it will take “just three or four years” for shipments to grow from millions to hundreds of millions a year. And he expects an explosion of creativity once that happens, with lots of niche functions for NFC, just as there have been for the iPhone.