Countries globally are marching towards a contactless world wherein an individual?s handset will become a single point of interaction, serving as a wallet, ticket and coupon, besides a communication device. While Wi-Fi and Bluetooth are widely accepted technologies for the exchange of files and data between gadgets, near field communication (NFC) is emerging as a preferred medium for faster and more convenient exchange of data between two NFC-enabled devices.
NFC can be defined as a short-range, low-power wireless technology that allows data transfer when two devices (technology enabled) are tapped or held a few centimetres from each other. NFC has evolved from the existing radio frequency identification (RFID) technology, which is used for mobile payments and ticketing. The technology is essentially different from Bluetooth as it does not require a pairing code to facilitate transfer.
Interaction between NFC-compatible gadgets can take place through several modes. Peer-to-peer NFC allows sharing of data such as business cards, website links, photos, etc. between two active NFC-enabled devices through a simple tap. The NFC chips in both the devices, however, must adhere to the same protocol and standard. Under the reader/writer mode, an active NFC-enabled handset is used to read/write data stored on a passive NFC inductive circuit (embedded on a tag or a smart card). A tap of the active NFC-enabled phone on the pre-programmed passive NFC tag enables it to acquire stored information from the latter. This is essentially a one-way communication. NFC interaction can also take place through a card emulation mode wherein an active NFC-compatible device acts as a virtual contactless smart card to an external NFC-enabled reader device. This mode is currently being used for purchasing tickets at metro and bus stations, and for carrying out merchant and banking transactions.
NFC is being considered a revolutionary technology for contactless payments. Google has announced its mobile wallet initiative and partnered with companies such as MasterCard and Citigroup to embed the technology into Android-based mobile phones to allow customers to make purchases by tapping their phones over an NFC-enabled point-of-sale system. This method of payment is possible through a payment card, which is similar to a traditional credit or debit card but has a chip that uses NFC technology. However, smartphones are increasingly replacing these cards. The latest range of smartphones from various manufacturers ? including BlackBerry from Research In Motion (RIM), Sony?s Xperia series and Samsung?s Galaxy series ? already offer NFC. Other key manufacturers producing NFC-compatible devices are Alcatel-Lucent, ZTE, Acer, Casio, Fujitsu, Google, HTC, Huawei, Lenovo, LG, Motorola, Panasonic and Nokia.
Applications
Besides mobile payments, NFC can be used for a variety of other applications. These include ticketing ? replacing paper tickets on public transport systems; merchandise purchasing ? replacing cash and credit cards to purchase goods and services; access control ? replacing traditional keys with ID cards on a smartphone; couponing ? replacing vouchers and coupons; and sharing e-business cards, photos, files and data. For instance, train systems in Milan, Madrid, Moscow, New Jersey and Tokyo use the mobile NFC-based ticketing system. Over 50,000 health care professionals in the Netherlands use NFC to track and manage home health care visits. Further, there are close to 2 million NFC-enabled rental cars operating in the US. France?s Toulouse-Blagnac airport is testing NFC check-ins. Also, MTS has launched commercial NFC payment services in Russia.
In each of the aforementioned cases, NFC can reduce costs by replacing physical receipts, tickets or plastic cards. NFC can enhance users? convenience through its ability to track purchases and enable users to store loyalty points on their phones. Further, NFC interactions encourage greater use of mobile services and in turn generate higher revenues for telecom service providers.
Issues and challenges
Security and reliability are the two key issues hampering NFC adoption worldwide. While the technology provides ease of use to customers, it also makes their private information vulnerable to social and technical frauds and risks. Other threats exist in the form of malware, viruses and RF interference, which cause RFID to malfunction. It is therefore a challenge to maintain the required consistency, reliability and interoperability within an NFC mobile ecosystem.
Besides, implementation of the technology requires huge investments on the part of original equipment manufacturers, software developers and retailers. Telecom operators are expected to introduce new revenue models which can benefit them and other players in the value chain alike. Currently, most of the cashless payments are being facilitated by several multinational companies, which are operating at very competitive margins. NFC-enabled mobile payments, however, would require the addition of more partners in the business, which in turn would add complexity to the value chain. This would result in squeezed margins and a higher service price for consumers.
Also, the entire NFC-related ecosystem is still underdeveloped. Often NFC-enabled devices are non-compliant with one another. For instance, an NFC-enabled Nokia smartphone cannot detect an NFC-enabled phone of a different make (BlackBerry or Samsung) and exchange data with it. The industry is yet to decide on a standard NFC chip that is compatible across different brands of handsets.
Indian scenario
As has been the case with other wireless technologies, India was a late adopter of NFC. In fact, the technology is still at a nascent stage in the country with only a handful of NFC-led services in use. Major smartphone manufacturers such as RIM, LG, Samsung and Sony are now offering reprogrammable NFC tags, which are rewritable using specific NFC programming apps. For instance, a Hyderabad-based eatery, SkyPark Cafe, is using NFC-enabled BlackBerry phones and PlayBook tablets to receive orders and collect money from customers. The BlackBerry NFC application can read plastic cards and debit customers? accounts to clear bills.
In addition, NFC-enabled ticketing and contactless payment infrastructure is being promoted. The Delhi Metro Rail Corporation is undertaking trials with NFC-enabled handsets and is expected to install dedicated entry and exit terminals for such phones.
However, several challenges have kept this technology from full take-off in the country. The primary challenge in implementing the technology is interoperability and bringing together several players in the value chain. For instance, a successful mobile payment service would require convergence between telecom operator networks and banking systems. On the other hand, NFC enablement in public transport networks would require an alignment of objectives between handset developers, app developers and transport operators.
Further, Indian consumers are still sceptical of conducting transactions on their mobile phones. While the number of people availing of mobile payment services is growing annually, a scenario where NFC will replace cards completely is some time away. Going forward, establishing NFC as a secure technology would be a key growth driver for service uptake in India.
Conclusion
NFC is increasingly gaining global acceptance as a key enabler for mobile payments. Over the past few years, its potential has moved beyond payments to reach several other industries. While challenges in the form of security concerns and an underdeveloped ecosystem may hamper adoption of the technology initially, NFC will prove to be a game changer for mobile communications in the long term.
