Paper and metal money are being pushed out of business already. E-Banking transfers, credit cards and SMS payments are already widely used. What will come next? In this article I would like to give an overview about NFC based payment systems: what are they, how they work, what the status is and why we will use it.
At first I would like to make a clarification that NFC is being adopted not only for payment solutions, but also for tickets to sport, music events, public transportation, as identification and authorization tools and so on. Probably you have something similar in your pocket as well - the badge you use to enter the building.
Let’s start with defining the term:
NFC - Near Field Communication - is a technology, enabling communication between various devices in short proximity (~10 cm). It is an extension to RFID technology (popular in security badges). NFC signal by design is not secured, but applications can use encryption methods, such as SSL, to make transactions secure also the short range of NFC makes communications more secure, which is somehow the main difference between NFC and Bluetooth. This technology is very interesting for mobile operators as reports have shown than mobile phone is preferred form factor.
How it is working? There are lots of use cases for NFC enabled devices, here is short description of several of them:
- You are in the McDrive and want to buy hamburger - instead of giving cash or credit card you just tap reading terminal with your phone and McDrive will get your account information via NFC, so it can complete payment.
- You jump into the bus and tapping with your mobile phone allows you to buy a ticket.
- You buy tickets to the concert online and transfer ticket information into your mobile phone by touching screen with it, so you can provide it later when entering the event.
There are more use cases of course, but they are not related to payments, so they are not covered here.
Why NFC and not other technology for such transactions? The key points are:
- Strong support from mobile devices and mobile software manufacturers, such as Nokia, Samsung, Sony, Nokia, Microsoft, HP, etc
- Strong support from payment brands such as American Express, Discover Network, MasterCard, Visa, etc
- Merchants see the value of faster processing times
- The technology incorporated in mobile phones, so devices can be distributed in very short time (prediction is that by 2012 almost 20% of mobile devices will have NFC technology enabled).
Current NFC news:
“As part of their “Payez Mobile” trial for contactless mobile payment, five major French banks are using Gemalto’s Allynis service offer. The banks are BNP Paribas, Credit Agricole-LCL, Credit Mutuel-CIC, Caisse d’Epargne and La Banque Postale Groups.” - ContactlessNews
Universities provide services proximity enabled cards in Poland, Germany, Serbia, Nigeria - “Universities think smart”
Research data from ABI Search - http://www.abiresearch.com/abiprdisplay.jsp?pressid=838
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