Every so often a technology comes along that has the potential to really change the market, for me one of those technologies is NFC (Near Field Communications). NFC has been standardized since 2003 but recently gained popularity due to hardware advances in smartphones.
A bit of background information – NFC technology is designed to enable wireless credit card transactions by simply waving your phone over a receiver. Your phone is then able to securely send a one time credit card number. Meaning that the risk of credit card fraud disappears as the credit card number will only ever be usable for one transaction. So even if an under achieving criminal records your transaction, it is no longer useful to them. Say goodbye to credit card fraud…at least the kind produced by physically handing over your credit card in restaurants or retail stores. Additionally, if you loose your phone, most NFC solutions allow for a user PIN to be used when you accept the transaction on your phone screen. This helps neutralize the risk of pick pockets getting their fingers into your account!
With the most recent Android phones supporting NFC and the new Apple iPhone 5 rumored to being supporting NFC, we are going to hear a lot more about this technology and it’s uses. The big question for the future of NFC is who is going to collect the payments.
Currently both Google and Apple are setting themselves up to be able to clear your mobile NFC payments through their app stores, meaning you no longer have a Visa or MasterCard. Instead you have an Apple iTunes NFC phone. Obviously this is causing a big stir and could be a stumbling block that slows the growth of NFC. As these technology companies cross further into the financial industry expect battles with existing payment providers MasterCard and Visa over territory, fees and roles. Not to mention, the all important ownership of the consumer facing relationship.
Another stumbling block that may slow adoption is “what benefit does a merchant receive from investing in NFC?”. There is an investment cost on the side of the merchant for a compatible POS system as well as probable transaction costs. I personally think Google will make sure this hurdle is addressed for merchants, whether it be through subsidies or some other incentive. Why Google you ask? Can you imagine Google missing a chance to gather vast amounts of information on where and how much people are spending on their credit cards?
Either way, I can guarantee you will be swiping your phone to pay for a meal in the next three years.
- Barry Latimer, VP Engineering, 5th Finger