Yesterday, Google announced its NFC payment system: Google Wallet.
Reading 90% of the articles about this subject over the past few years (aside from the plethora of “Will / won’t the next iPhone have NFC” stories), you could be forgiven for thinking that NFC was just a way of putting a payment card in your phone.
Mobile contactless payment is a great piece of functionality and one which many of us (myself included) have been longing for but it’s hardly new: Japan has had it for years, with the FeLiCa system embedded in most handsets. It’s well-liked, trusted and very broadly accepted. Over here, the main hurdles have been political rather than technical.
Payment is a fascinating story on its own and it’s very tough to predict who will come up with the dominant solution, but we decided to write a series of articles about some other aspects of NFC to demonstrate how it’s capable of so much more.
What we have been pondering is: assuming that phones have NFC capabilities, what does that allow you to achieve outside of the holy trinity of:
- Payments
- Transport / event tickets
- Vouchers / loyalty cards.
Some of these other use cases are well-known today, such as key tags for access control systems (door locks), and others will become better known soon, such as NFC-based check-ins for location-based services such as FourSquare.
It’s our belief that NFC is far from another gimmick and has the potential to actually change the way we interact with the physical world in a profound fashion.
This series of articles will dig further into these areas and look at what can be done, the challenges faced and some possible ways that they could be achieved.
What’s coming up?
Coming soon, we look at how NFC can improve the top-up method for pre-pay mobile phones, help people with hearing and sight difficulties, stop your washing machine annoying you, make your trips to shops and restaurants faster, improve your product selection experience, share media around the home, expand the functionality of products, improve user interfaces and allow you to build great cross-platform libraries.
But first, it would be slightly crazy of us not to even glance at the world of NFC payments: it’s going to be the most commonly known use for NFC and the main focus of all the companies involved for the next few years.
NFC payments – at last! But how?
Finally, operators and handset manufacturers across the world have started to take proximity communications seriously and are in a land grab battle to become the controlling point of a new mobile handset-based payment system. Everything Everywhere, in the UK, have announced their NFC trial on their Orange brand in the past few days and Apple are widely expected to add this to the iPhone soon.
Will it be the credit card companies through plug-in NFC dongles such as phone jackets or MicroSD cards, the handset manufacturers and platform vendors through on-device “secure element” chips or mobile operators through NFC SIM cards which will form the dominant payment infrastructure?
It’s a tough one to call: each has strengths although the dongle approach is arguably the weakest of the three. Platform vendors could have a big say in this by what they permit to run on their OS: will Google permit operators to sell Android phones which disable the Google Wallet functionality and replace it with their own software and SIM card NFC secure element?
But, if this does not resolve itself soon, there looks set to be a great deal of fragmentation with incompatible solutions across the world and even between different operators, OS, device and payment card vendors within a country. Yikes.
Why NFC payments?
This is the most economically significant reason to invest in an NFC infrastructure. I won’t go too much into depth or re-hash what is common knowledge but will give you a quick set of bullet points to give you food for thought.
1) People using contactless payment technologies spend more money.
Partly this is down to a lack of visibility of how much you’ve spent but, less intuitively, studies showed that there was a significant barrier to buying a low cost item if you only had a large note – people didn’t want to break into it and have to carry around all the change.
2) Cash is very expensive.
Especially with the costs of raw materials rocketing in recent years, some currencies have ended up in the situation where coins were worth more melted down to raw materials than they were as legal tender! Manufacturing cash, securing it, transporting it, destroying it, validating it, storing it and processing it adds massive costs to businesses, banks, transport networks and vending machines.
3) Cash is money not being used.
When that money is sat their in your wallet, nobody is getting any value from it – this goes for shops, banks and people alike. Casinos gained massively by moving from cash to ticket-based systems, helping security and improving cash flow.
4) Fraud is on the up.
Counterfeiters are getting better and better at faking coins and notes: in 2009, the bank of England found about £11 million of fake £20 notes and they estimate that there are some 30-40 million fake £1 coins in circulation at any time.
5) It’s cool!
Seriously, it’s great: it’s better than cash in pretty much every way imaginable. It’s faster. You can do many new things: track your spending, not lose it down your sofa and compartmentalise money for different purposes. You’ll love this: Steve Jobs would describe it as magical, where the technology disappears and doesn’t get in the way of the experience, allowing you to do things which seemed impossible.
So, yes, NFC payments will be a big game changer and I, for one, can’t wait to get rid of my wallet. But the technology is capable of so much more and that’s what we’re going to be writing about and demonstrating over the next few weeks.