October 20, 2011, 2:10 PM

Delay could sap NFC attraction for consumers

The wireless technology must conquer other technologies and consumer habits.

Lead Photo

Consumer habits and other technologies pose challenges to emerging technologies like Near Field Communications.

Near Field Communication wireless technology that enables mobile payments and special offers will not live up to its hype anytime soon, especially as consumers have other technologies they can use to accomplish the same goals and potentially become accustomed to mobile shopping in its current form, said mobile commerce experts at the Mobile Contactless Payment Innovations Summit this week in Chicago.

NFC is a wireless technology that enables two-way communication between devices, such as tapping a smartphone with an NFC chip against an NFC-enabled payment terminal to complete a transaction or redeem a coupon. But, only one smartphone currently offers NFC—the Google Nexus S 4G on the Sprint Network in conjunction with Google Inc.’s Google Wallet. Sprint has sold between 400,000 and 500,000 of these phones, estimates Mark Beccue, senior analyst, consumer mobility, at ABI Research. Google will not disclose the number of Google Wallet users, which, based on the number of merchants accepting the payment mechanism, is likely very small.

Developed nearly 10 years ago, NFC has long had promise as a technology, but has yet to prove its value for enabling mobile payments or other purposes.

The challenge is ensuring that NFC is as easy to use for consumers and retailers as today’s payment cards. “NFC is a technology that is going to find its way into phones,” Aditya Khurjekar, director of new business development at Verizon Wireless, said during a panel at the summit. “The key here is that consumers don’t buy NFC. Consumers buy the experience this technology enables.”

Consumers already have proven their readiness for mobile commerce purchases, Khurjekar says. For example, consumers do not hesitate to buy ringtones and wallpapers for their phones. “There’s no reason the one-click checkout experience can’t be used to sell a pair of shoes,” he said of in-store mobile payments, because consumers have proven they will make financial transactions on their mobile devices.

However, NFC backers face a potential risk if consumers become accustomed to mobile shopping in its current form, says Tim Attinger, manager director at Market Platform Dynamics, a management consulting firm, especially if more NFC phones and services take a while to get into the hands of consumers and retailers. “The longer it takes to build a value proposition around NFC adoption, the less likely it is to ever scale,” he says.

Instead of NFC, consumers can use existing technologies for mobile payments that do not require them to make any mobile technology upgrades. Such mobile payment schemes include payment cards and non-NFC mobile wallets that link smartphone-based accounts to payment terminals through entry of a phone number and a PIN, and text message programs where payment services companies link retailers and customers at the point of sale with unique payment codes delivered via text.

Such schemes combined with a dearth of available NFC technology and a growing comfort among consumers with today’s mobile commerce options represent a clear hurdle that NFC backers must overcome, which is a tall order, the panel concluded.

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