[By Duncan McLeod]
Imagine the next time you’re standing at a checkout point at the supermarket. Imagine paying for your groceries simply by bringing your mobile phone next to a payment terminal and having the money debited off your account.
It’s not as far-fetched as it sounds. Near-field communications (NFC) technology could one day replace the plastic cards and cash in your wallet.
Companies such as Google, Nokia, Visa and MasterCard are all working at building NFC systems — a short-range wireless technology, not dissimilar to Bluetooth, that can be used to make electronic payments quickly and without hassle.
Financial services industry executives think the technology could eventually replace plastic cards and even cash.
The potential applications for NFC don’t end in-store. The technology could be used for mobile ticketing in public transport or at concerts and other public events.
An exciting aspect of NFC is that phones that support it can also be used to read the radio-frequency identity (RFID) tags commonly used today by courier companies and retailers to check the location of parcels or to track goods in the logistics chain.
RFID chips can be integrated into just about anything. So, imagine walking down the street and seeing a poster advertising an upcoming concert. If the poster has an integrated tag, you’d be able to hold your NFC-enabled phone up to it and immediately get more information about the event, and even book tickets on the spot.
Until now, though, few phones have included NFC. A few Nokia handsets have used it, but most phone manufacturers have opted for the older, slower and less functional Bluetooth technology instead.
But now NFC is expected to become a standard, at least in high-end handsets. Its inclusion in Google’s new smartphone, Nexus S, which runs the company’s Android operating system, is likely to spur other handset manufacturers that use Android — HTC, Samsung, LG Electronics, Motorola — to include it in their devices. It could also prompt Apple to adopt the technology in the iPhone 5, expected this year.
Eventually, the technology should filter down to cheap handsets, expanding its application to billions of people.
The GSM Association, an industry body representing most of the world’s mobile operators, is already spearheading a programme to develop applications using NFC. Thirty operators, including Vodafone, which owns SA’s Vodacom, are engaged in trial programmes.
A recent article on NFC in US financial magazine Bloomberg Businessweek quotes research firm iSuppli estimating that shipments of NFC-enabled phones will rise more than 50% this year, from 52,6m in 2010.
Nokia has reportedly already indicated that all new smartphones it sells in 2011 will support the technology.
Worldwide shipments will increase to 220,1m in 2014. These devices will result in more than US$22bn in payment transactions by 2015, up from virtually nothing in 2010, Bloomberg Businessweek reports, quoting research from Boston firm Aite Group.
Most industry players, even the most bullish advocates of NFC, admit it will take a long time for the technology to become mainstream. Retailers will have to install contactless readers at the point of sale and consumers will have to overcome security concerns. There’ll also be inevitable resistance to change.
In time, though, cash and plastic cards will become less important in payments. Eventually, they may even disappear.
- Duncan McLeod is editor of TechCentral; this column is also published in Financial Mail
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