By delivering intuitive connectivity, auto-configuration, and smart key access, NFC accelerates data transfer while enhancing levels of security. It is important to note that in a pilot program in Chicago, Motorola is testing NFC payments for an upgrade in the MasterCard PayPass contactless processing system.
From a technical perspective, an over-the-air (OTA) infrastructure is necessary to support NFC applications, including transaction settlement, coupon downloading, and smart poster content downloading (tag on poster links with mobile device for communication). The OTA protocol involves strong security measures designed to ensure proprietary data is not exposed or vulnerable to interference or interception. Motorola is among several vendors claiming that the benefit of NFC applications outweigh its cost (infrastructure and device chipsets).
In November 2007, Infineon Technologies of Germany announced a highly secure microcontroller to secure mobile commerce applications initiated with NFC chips. The microcontroller, like the NFC chipset, resides inside the cell phone casing. The microcontroller acts as a firewall to protect financial data exchange interference and allows account and transaction data to be safely stored on the NFC chip.
NFC APPLICATIONS BECOME MORE VERSATILE
Soon, users may be able to open electronic files and door locks as well as replace remote control devices with an NFC-enabled cell phone. From a unique application perspective, an NFC-embedded photo frame that automatically recognizes a compatible NFC device and enables the transference of pictures to or from the frame or device, is expected in the near future. In addition, NFC phones will likely be capable of storing receipts for all purchases, thereby creating an electronic transaction history.
According to ABI Research, American consumers favor using a mobile handset for transacting in-store payments, but a significant majority prefer having only one credit or debit account stored in the device. Much of the work on developing standard application platforms across NFC handsets has been directed at providing an application capable of supporting and managing multiple payment accounts (from credit and debit card issuers).
CONSUMERS PREFER A SINGLE ACCOUNT
The consumer’s belief that a single account is easier to manage with mobile payments is contrary to the wide menu of settlement options designed into the specifications of most NFC-enabled devices. Other findings from this research study include consumer attitudes toward handset security risks and potential hidden account fees (consumer and retailer). The solution to these issues requires a cooperative partnership between mobile operators and NFC payment processors.
A driving force to the expected surge in mobile phone manufacturer production in 2008 is based on the projected activities in the marketplace. In the coming year, leading payment processor ViVOtech has announced plans to strongly support NFC payment programs across the U.S. and throughout Europe.
Along with payment capabilities, this rollout will also feature two important NFC features: smart tapping and electronic couponing. A smart-tag tapping application allows consumers to touch an NFC device to a sensitized sign or poster and download its contents (e.g. movie trailer). Downloading electronic coupons to NFC phones provides a long-awaited direct distribution of item promotions.
In general, the use of contactless payments grew 15 percent in 2007, and at year end the market was valued in excess of $200 million with an expectation of $820 million by 2013 (ABI Research). ABI expects 6.52 million NFC chipsets to be shipped in 2008.
CONTACTLESS VENDING EXPECTED TO GROW
Digital Transactions Magazine in January 2008 claimed that the number of U.S. merchant locations, vending machines, and taxi cabs capable of accepting contactless transactions, and therefore payments initiated with NFC-enabled cell phones, will rise from the current base of about 70,000 to more than 150,000 at the end of 2008.
The primary motivators for deploying contactless solutions in vending are speed and convenience. Speed of service is especially attractive in a busy location, as is payment simplicity. Similarly, customer convenience and accelerated transactions are the main focus of NFC payment interfacing.