Within the last week, Nokia, Google Android and RIM have announced, alongside rumours of Apple’s iPhone 5, that 2011 will see the start of NFC-enabled phones, and the beginning of widespread commercial usage of this exciting piece of technology.

Near Field Communication (NFC) is a form of wireless communication technology that allows an exchange of data from two devices if they come within 10cm of each other. It’s been around for quite a while; in fact most Londoners use it every day for travelling with Oyster cards. NFC phones first appeared in 2007, when Nokia released the first phone of this type. With all the benefits of NFC, it’s surprising that we still haven’t seen widespread commercial usage. However, this may all change early next year with the release of the Apple iPhone 5, which is rumoured to be NFC-enabled. If the excitement and buzz around new iPhones continues, this could be the start of something truly revolutionary. In an announcement only last week, Nokia pledged to activate their NFC chips in 2011, with Google and RIM keen to follow the trend, both declaring that the next version of Android and future Blackberrys will come with NFC. Clearly, it’s something not to miss out on.

With a big push from suppliers of mobile technology, how is NFC technology going to benefit the consumer? GfK NOP has been testing consumer applications of NFC since 2007, when we ran a high profile NFC trial for O2 in London. The trial reported positive feedback (in the press) for the technology, particularly the Oyster card integration on a mobile handset. People need incentives to embrace new technology, and now that the trials have shown the convenience and benefits of NFC, and users are clearly happy with it, it appears that the incentives are there.

Since the trial in 2007 the benefits and use cases have moved on. The new technology means that phones could become mobile wallets, keys, loyalty and travel cards, devices which allow vouchers, rewards and tickets to be received and stored and which transmit information from one device to another, for example, a camera or a television. NFC has been seen, through hundreds of trials and live services, to benefit the consumer. One of the main benefits is convenience. A typical customer journey might be as follows: you go into a shop and, by geo-location, receive information about that shop and/or offers available in it; you then buy items using your mobile and receive loyalty benefits, or use vouchers stored on the phone. On leaving the shop, you can get travel information by tapping an NFC code at a bus stop, and then pay for your journey by mobile. Once off the bus, you can go through ticket barriers to a concert, simply by tapping the phone on a ticket terminal.

Over the past few years merchants and handset manufacturers have, alongside banks, service providers and mobile network operators, been working out ways to capitalise on this consumer interest. As a result, several new partnerships and initiatives have been established, for example AT&T, T-mobile and Verizon announced recently a joint venture to utilise a mobile payment system, and some countries even have government backing for such schemes. Talk of NFC has increased dramatically in the last few months, as shown in Figure 1[1], and will continue to do so as more NFC services go live. An initial barrier to NFC usage growth – merchants’ unwillingness to upgrade transaction terminals (it’s expensive to do) – has now been solved with the introduction of a new Mobile Pay App. A geo-location tool identifies the merchant, the user taps to confirm the store, a PIN and payment is entered, the ‘Pay Now’ button hit, and voilà, transaction complete.

Figure 1. Google Trends image showing search volume index and news reference volume of ‘Near Field Communication’. This shows how online mentions of NFC have increased dramatically since August, and particularly in the last month, highlighting the buzz around this technology.

The interest from the various parties involved comes with the difficulty, however, of deciding where to place the NFC element, with mobile network operators, handset manufacturers and financial institutions preferring NFC in the SIM, embedded in the phone and on a microSD card, respectively. This competing interest will no doubt result in a power shift within the various parties involved, although it’s likely that NFC will benefit all three.

So will 2011 be the year NFC finally gains momentum?

Barriers to adoption

One of the biggest problems with NFC technology is one of its biggest assets… do consumers want everything on their phones? What if the battery dies? What if it gets lost or stolen? And it’s rather off-putting to have movements and purchases tracked as they can be by an NFC phone, and to be bombarded with information. Despite it being a popular concept to many, still over two-thirds of consumers have said they don’t want to pay by their mobile[2]. For the first few years anyway, NFC adoption might continue to be slow if limited to smartphone users and if people remain uninformed about the service and unconvinced that issues such as security and batteries are actually not a problem. Some speculate that only 16% of mobile subscribers will have NFC-capable mobile devices by 2014[3]. Because of these doubts, we’ll have to continue to wonder how well NFC will do, and whether these new partnerships will gain momentum in the New Year.

Positive signals

However, with companies like Apple (reportedly) driving service provision it’s hard to see how such NFC initiatives will fail to capture the imagination of the consumer smartphone market. Apple has a knack of taking technologies that have struggled to gain momentum (e.g. touchscreens and video calling) and giving them a new lease of life. In which case 2011 marks the start of a very exciting development in consumer–business relationships and how people use their phones.

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[1] http://www.google.com/trends?q=Near+Field+Communication&ctab=0&geo=all&date=ytd

[2] http://www.nearfieldcommunicationsworld.com/2009/12/01/32406/59-of-consumers-want-to-use-their-phone-to-make-purchases-at-the-point-of-sale/

[3] http://voicendata.ciol.com/content/ContributoryArticles/110051003.asp

PHOTO CREDIT

http://flic.kr/p/8zJvup

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Tags: AT&T, iPhone 5, Mobile Pay App, Mobile Payments, Mobile Wallet, Near Field Communication, NFC, Nokia, O2, RIM, Smartphones, T-mobile, Verizon