NFC PaymentThe new generation of smartphones running the Android operating system come loaded up with special equipment, called NFC chips, that theoretically would allow for those phones to be used as payment device. Surprisingly, few pieces of software are available in the market to complete the loop, leading NFC payments in a limbo that could kill the concept altogether.
Near Field Communication, also known as NFC, is a set of standards for smartphones, credit cards, and similar devices, to communicate with similar devices by bringing them close to each other (generally within less than an inch, or a few centimeters apart). Starting in 2004, several phone manufacturers joined forces to define the standard and help.
Nokia, Blackberry, Samsung, Microsoft, and Google (but not Apple) have all been supporting the technology in their operating systems for over a year and a variety of devices have entered the market with the appropriate equipment in place. Meanwhile, the biggest players in the credit card business (Mastercard, Visa, American Express) and some of the largest banks and payment services in America (Bank of America, Citibank, Wells Fargo, HSBC, Paypal) have rolled out some version of technology across their infrastructure. And telecommunication companies like AT&T, Verizon, and T-mobile have all sworn to offer services in 2010.
With that kind of backing, one could expect NFC to be rolled out widely across the country. In fact, signs point to an increase in the potential, with credit card terminals supporting Visa and Mastercard appearing at increasing frequency in stores around the country. In New York, taxis and some subway stations, riders can pay for their fare by tapping an NFC device against the card reader. In Chicago, LA, and New Jersey, similar services are available to train and subway riders.
But while the infrastructure to accept NFC payments appears to be in place, the availability of software that runs on the latest devices isn’t. Google Wallet, which can run with the company’s latest operating system, is limited to a few phones, with newer devices like the Samsung Galaxy S4 and the HTC One being left out, even if they meet the hardware and software requirement to support it; ISIS, a partnership between American Express and the largest telecom operators in the US (AT&T, Verizon, and T-mobile), is only available in some parts of Austin, TX, and Salt Lake City, UT; Samsung Wallet, a partnership between Samsung and Visa, was announced at the World Mobile Congress but did not ship on the company’s latest flagship; Mastercard’s own Masterpass service does not provide any payment capability via NFC, while their own credit cards spotting the PayPass logo already do.
So the challenge is that many actors are trying to position themselves in the field, but, in the process are landing on each other’s feet. Computing pioneer Bob Frankston pities the telcos as he believes that they do not have any strategic roles in that space. “NFC is just a way of transfering some bytes, ” says Frankston, explaining why partnership like ISIS may have a hard time. “All you really need is to transfer a few bits to identify the transaction and the rest can be done using [internet protocol] which could take milliseconds. Out of band offerings, like apps and QR codes, really remove the need for the telco middlemen.”
Meanwhile, companies like LevelUp and Square are increasing their footprints in the phone payment space, reducing the chances that NFC could take off as a form of payment via mobile phones. This may be why, when talking about NFC, Samsung no longer mentions payments but looks to things like sharing pictures and videos as primary use case.
Has the future bypassed NFC payments? Will other solutions become more prevalent? Only the future will tell.