phone emitting information

How to prepare for the coming of NFC

NFC, or Near Field Communications, is coming to a smartphone near you and will quickly change the way you receive and send data. So what is NFC and how does it work?

To most Australians, NFC is probably something that sounds a bit like a roast chicken franchise. Which is fine, because by the time NFC reaches mass adoption in Australia, it won’t matter if you’ve heard of it or not. It will just work. Before long, you will be using NFC on your smartphone on a daily basis, without even realising it. Just like you don’t need to understand anything about plumbing to get water out of a tap.

NFC stands for Near Field Communications. So, without getting the slightest bit technical, NFC enables communications within a ‘near’ field. What this means in the real world is that you can tap (or wave) your NFC enabled phone near something to activate a data transfer. Depending on the context, that data is only really limited by your imagination. It could be a phone number, a marketing message, a coupon, a virtual tour or a financial transaction.

To put it in the context of smartphones, with NFC you would be able to wave your smartphone near a bus shelter, a supermarket product, a clothes hanger in a retail store, a magazine or even a cash register and be instantly connected to some content, an action or an app on your phone.  (Are you seeing the potential here?)

You may have been unwittingly using NFC based technology in your daily life already, for example if you have one of the new PayWave of PayPass credit cards or use the Myki ticketing system in Melbourne. When we talk about NFC in terms of smartphones, we are talking about putting that same capability into a mobile phone. So instead of scanning your credit card or a token, you can scan your phone.

NFC technology is currently available in Australia on a handful of devices, but usage is pretty low. Most consumers don’t realise the technology is on their phone and even if they did, they currently have little opportunity to use it anyway. Until brands, banks, publishers, content owners, retail outlets, venues, councils and marketers everywhere start creating services that use NFC, those of us with NFC-enabled devices will remain either blissfully unaware of the opportunities, or frustrated by the lack of applications for use.

On the other hand, it might be that there is a missing link in the adoption curve. It is only a matter of time before all smartphones come equipped with NFC pre-installed. What is stopping the creation of opportunities to use NFC in our daily lives? Why can’t I grab my smartphone today and tap it on a bus shelter advertisement to buy movie tickets? Or a food package to see a list of ingredients? Or wave it at the PayPass terminal at the supermarket to pay for my groceries?

Many commentators believe that mobile payments are the missing link that will drive adoption of NFC capability to the masses.

So what do we mean by mobile payments? Mobile payment is simply using your mobile phone as though it were a credit card. To pay using your mobile, you need an NFC enabled device. Then you need to have installed an app that knows your banking details, just like a credit card is encoded with data from your bank. Once you have the app and an NFC device, you can simply scan your device in front of a contactless payment terminal to pay for anything that a credit card can.

The theory is that people will make the effort to use NFC to simplify their banking and payments habits. Once consumers take this step to engage with the capability, there will be an appetite for trialing NFC in other contexts – and that’s when the rest of us will jump on board.

So what will it take to make mobile payments work in Australia? What we need is:

  1. NFC device penetration
  2. Apps that integrate with everyone’s bank details,
  3. Enough terminals at enough points of sale

So other than device availability, the other elements holding back NFC payments locally are the launch of mobile payment software by the local banks, and rollout of contactless payment terminals at retail outlets. Things are coming together though. There are more than 100,000 contactless payment terminals already in Australia, the major banks are in various stages of development and planning for NFC payments, and there are already more than 30 devices on the market that claim to be NFC enabled. This is a good Australian oriented article about NFC and the local market, if you’re after more information.

Other than Mobile Payments coming to life, there are many who feel Apple would need to launch an NFC capable iPhone to push mass adoption of NFC services over that consumer tipping point. This is looking increasingly likely, with recent announcements from Apple about upcoming software and hardware releases.

Firstly, it seems inevitable that the next iPhone to be launched will come with NFC built in. We are likely to see that new iPhone – AKA iPhone 5 – by the end of the year, (or even by September if rumours are to be believed)

Another factor is the recent announcement of Apple’s Passbook App, a piece of software that seems to point to the likelihood of NFC being on the horizon.

Passbook is set to be launched as part of IOS 6 in the US Autumn. Although not technically a mobile wallet, Passbook sets the stage for future mobile transactions and looks like it could be be the perfect platform on which to launch NFC payments.

When launched later this year, Passbook could potentially lighten your wallet by taking on management and storage of a lot of the things you currently keep there. Passbook will collect digital tickets, boarding passes, coupons and loyalty cards in one place, maintain communications and updates with the providers and let you access and process them within a single interface. All it will take is a few key companies (like food and retail franchises or a major airline) to support Passbook, and we’ll see everyone jump on the bandwagon with coupons, ticketing and loyalty programs. Knowing Apple, they will have already signed up the big players, so this is almost a given.

Experts in the travel and airline industry herald passbook as a game changer, and there is no doubting the huge opportunity on the horizon for loyalty marketers. Here’s a great, detailed analysis of the Passbook functionality, impact & technology .

It really is only a matter of time before all smartphones come with NFC capability embedded. In only 3 or 4 years it’s likely that there will be as many NFC capable phones as there are currently smartphones in Australia. Things have a way of moving fast in this space, so we could reach that NFC tipping point even sooner.

Many people think that NFC in mobile devices hasn’t  taken off yet because the technology doesn’t solve an immediate consumer problem. With Passbook, Apple may have once again illuminated the path by identifying a problem that NFC can solve. Passbook will simplify and consolidate ticketing, vouchers, coupons, and loyalty programs with a single solution that both marketers and consumers can understand and work with.


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