NFC is here - but do people know how to use it?
I am finding it increasingly difficult to find a news article that does not, at some point or another, refer to NFC. It’s everywhere – well, possibly not in fevered opinion pieces discussing England’s chances against Italy in Kiev on Sunday evening, or those bemoaning the fact that it’s now late June and that a monsoon appears to have taken up residence in the garden, but pretty much everywhere else. Yes, naughty old Windsor is exaggerating again, but only slightly. Tap NFC into Google News and you get over 80,000 hits, which is going it some for a technology that only a minority of individuals possess and in many cases – as with contactless cards – only a minority of individuals with the technology even know that they possess it, still less how and where they can use it*. Leaving the contactless cards aside for the moment, I’d like to focus specifically on the fairly significant momentum behind NFC wallets that is developing across the mobile industry (and indeed beyond it). While NFC solutions have been in commercial use across Japan and Korea for several years, only in the past year or so has there been any momentum outside these core markets. First it came in dribs and drabs – an Orange/Barclaycard tie up here, a Google Wallet there (there being the US market). But suddenly – almost as if someone had flicked a switch – NFC has exploded. Last month, the Post Office revealed plans to roll out contactless payments across the UK, allowing Visa and Mastercard customers to make payments of up to £20 using NFC-enabled phones in 11,500 branches. In the past few days, a welter of further announcements across the globe: Samsung’s NFC technology will be used in wristbands (in lieu of paper tickets) at a Red Hot Chilli Peppers concert prior to using NFC-enabled handsets for the same purpose; NFC pilots have been confirmed in New Zealand and Romania; critically, Microsoft has unveiled support for NFC and a mobile wallet for its Windows Phone 8. The support of players across the value chain – handset vendors, financial institutions, operators, merchants – was always going to be crucial if NFC was going to establish itself as a viable payment mechanism. Certainly, some major players – most notably Apple – remain ambivalent about the technology, but the fact remains that an increasing proportion of smartphones are NFC-enabled, and an increasing proportion of merchants are deploying the necessary infrastructure. So far, so good. The first problem is that of awareness: despite the fact that NFC has been (fairly) widely deployed as a payment mechanism, the various players rather unfortunately forgot to mention this to the public, which not surprisingly put a crimp on NFC’s takeup. For all NFC’s convenience, it will not achieve its potential without some fairly extensive, exuberant and educative marketing campaigns. Consumers know how cash works, because they’ve been using it all their lives. They know how credit cards work, if not necessarily how they’ll pay off the balance. The mobile wallet is a new phenomenon, and needs to be explained in words of one syllable. Problem two: while the limit of £15-20 has been put in place to assuage consumer concerns about someone running off with their phone and making a payment with it, the problem is that for low level transactions, consumers will probably just reach into their pocket for a note. Furthermore, with such a low limit, there is a danger that as you approach the till with three or four items (magazine, bottle of wine, chocolates, another bottle of wine for luck) you’re approaching the NFC limit and rather than do the sums in your head will shrug your shoulders and reach for the cash or card instead. Yes, there are problems, but also significant opportunities for NFC: in retail payments, in coupons, in ticketing. While the market is currently worth around $23 billion in retail sales, these sales are overwhelmingly taking place in Japan and Korea. But address these core problems, educate the market, up the transaction caps, and that will change. *On examination of some of the Google News articles, I learned that NFC, in addition to be shorthand for “Near Field Communications”, is also an abbreviation of “National Football Conference”, and this also accounts for some of the aforementioned 80,000 news items. Gridiron, however, is far more confusing to me than mobile payments, and I will stick resolutely to association football and rugby.