July 14, 2011, 4:58 PM

Be careful whose phone you bump into

PayPal demonstrated NFC payments this week. Are we supposed to be impressed?

Lead Photo

I’ll be straight with you—I’m an NFC skeptic when it comes to its grand arrival. Near Field Communications, that handy wireless technology that beams data from smartphone to point-of-sale hardware when the two are within a few inches of each other, is one of the most hyped technologies today. And this week, PayPal added to the hype.

It presented a demo of a new person-to-person—not person-to-business, mind you—NFC system that enables individuals to beam funds from one PayPal account to another PayPal account when two people come together, touch their PayPal apps a couple times, then bump their phones together. I’d call that interesting, but not earth-shattering. Especially since the system, to be released in the months to come, only works on Samsung Nexus S smartphones (which have NFC chips embedded in them).

The promise of NFC is in retail. When people can wave their smartphones by a point-of-sale terminal and pay for merchandise.

I see studies and opinions flying in and out of my e-mail box every week saying NFC is right around the corner. Oh please. What are these folks thinking? Only a handful of the scores of smartphones on the market today have NFC chips inside. And it sounds like Apple Inc. is backing away from NFC for its soon-to-be-launched iPhone 5. And then there are the merchants. They have to buy and implement point-of-sale terminals that can recognize NFC transmissions. That’s a giant investment for retail chains. Admittedly one they’ll have to make eventually. But the key word there is eventually.

What PayPal did this week was cool. And it indeed is a sneak peek at the future of payments. But beware the hype you’re seeing floating around the Internet. Yes, having PayPal behind NFC payments is key. It’s a big player that can make things move. But those two big obstacles—NFC-equipped smartphones and NFC-equipped POS hardware—loom large.

NFC will get there, no doubt. But one person-to-person transaction on one type of smartphone does not a revolution make.

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