19
Jul

WE ARE (ALMOST) BIONIC. NFC, the new way to pay for goods and services

photo: blog.visa.com

ABSTRACT

NFC is an easy-to-use, intuitive technology because all it requires is a simple gesture with your mobile phone.

It increases customer comfort, because it reduces queuing time and there is no need to carry coins or waste time checking change.

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Count the number of plastic cards in your wallet, including credit, debit and the so-called “loyalty” cards. Would you be willing to add another card to your wallet?

Now calculate: How many centimetres away is your mobile phone from your body? Surprised? We are indeed almost bionic.

The telephone has practically become a “natural” extension of our hand, our fingers.

It is not by chance that a mobile phone is reported missing to the police after 4 hours, while a lost passport is reported missing more than a day later.

And what’s more, the phone has none of the problems of space that a wallet does. It is highly likely that with the advent of NFC, Near Field Communication, you will end up replacing it.

What is NFC?

It is an RFID technology that permits two objects in close proximity (usually not more than 4 cm apart) to identify one another and establish communication and data exchange.

One of these objects is typically a mobile phone with an NFC chip. The other may be a device in a store cash register.

How does NFC work?

When the customer goes to pay, if it is a small amount (for example, less that €20) s/he waves the phone near the reader embedded in the cash register and payment is made. If the amount is larger, the customer has to introduce his/her code and choose the credit or debit card with which to make the payment. The system then detects if this person has a “loyalty card” with the retail chain and points are automatically added.

Advantages of NFC

This is a fairly “invisible” technology with no problems adapting to it because it is easy to use and intuitive, needing just a simple gesture. And this is done precisely with the mobile phone, which you always carry with you.

NFC increases customer comfort because it reduces queuing time, and there is no need to carry coins or waste time counting your change.

This is an extremely safe technology because not only does it incorporate encryption to prevent fraud, but you cannot be charged the same amount twice, not even when you swipe the reader twice with your phone.

Why the phone?

My mobile phone is the interface that connects me to my reality, to my world. It is the bridge to my things, to what interests me and what I do. It does not identify me more than a passport, even though I identify myself more with it (and with what it contains) than with a passport. What’s more, it always has real-time connection to the Internet and, therefore, to a server.

NFC can also be used to receive offers or requested information by waving the phone near a chip embedded in a poster at a bus stop, for example. It can also be used for public transport ticketing or as a tool for access control to premises.

Its future

Several research companies point out that this technology is likely to take off in 2014 or 2015. Frost & Sullivan anticipate that the number of NFC-enabled phone users will reach 53% in 2015.

But for this to happen, all the operators (banks, cards, telephone companies, retail chains, etc.) will have to participate actively for users and retail stores to fully appreciate its usefulness.

And things are moving. Visa has already been piloting mobile payments with iPhones in Turkey, Italy, Poland and the United Kingdom. In Spain, telephone operators, Telefónica (02), Vodafone UK and Everything Everywhere (Orange and T-Mobile) have embarked on a joint venture.

In the USA, Google Wallet is almost ready, working in alliance with Citi MasterCard. Google wants to know what information people are interested in. This can be gleaned far more from what people buy than from their web searches. This will enable Google to sell more effectively-directed advertising and also charge retail chains for providing their links.

In Sitges (Barcelona), a trial run was carried out from May to October 2010, with the collaboration of La Caixa, Telefónica, Visa, Samsung and the town council, with 1,500 customers and 500 shops. 90% used the mobile phone payment system and 60% of the transactions exceeded €20, requiring the use of their code. Customers rated their experience 8 out of 10. 90% said they will continue to use it.

Although collaboration is needed, it remains to be seen which companies will come out on top, and how the NFC “control of the waves” takes shape.

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Lluis Martinez-Ribes

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