Cellum Insights

Don’t be confused by all the confusion over NFC

When Apple unveiled the iPhone 5S last month, the latest model in its much-emulated line of mobile devices was revealed to include several new technologies, most notably a built-in fingerprint sensor called Touch ID. One technology, however, was conspicuous by its absence: near field communication, or NFC.

A set of standards developed to allow smartphones and other devices to connect with each other when brought close together – so-called “tap and pay” – NFC has at times been heralded as the most likely technology to make mobile payments universal. Who wouldn’t want to pay for their coffee by simply waving their phone over a point of sale (POS) terminal?


But while Google included support for NFC in Android (as well as in its own Nexus S smartphone) and Samsung similarly made its hugely popular Galaxy S NFC-compatible, Apple apparently decided that a pretty metal handset case was more important than a technology tipped to lead the way in the mobile payments revolution. (NFC uses a frequency that can easily penetrate Kevlar, plastic and other non-metal materials, but which struggles to get through metal.)

Of course, Apple did not make its choice assuming that it was preventing its customers from enjoying a key modern convenience just for the sake of product beauty. Simply put, NFC is, like many other technologies in the mobile payments area, very much still a work in progress.

One thing holding NFC back is the cost associated with its adoption by retailers, who must purchase new NFC terminals. And while NFC solutions often integrate seamlessly with merchants’ existing POS systems, retailers still need to worry that their customers are using mobile devices which, like the iPhone, aren’t NFC-compatible.

Compare this to, for example, solutions based on QR codes and barcodes, for which merchants only need to add a graphical code to a receipt or publicly post it in order for the customer to initiate a payment. Meanwhile, there is the proximity limitation inherent in the “near” of near field communication: One of the best rationales for mobile payments in the retail setting is giving customers the ability to pay or receive coupons and other related information without ever getting close to a POS terminal. (Goodbye movie theater lines!)

There have also been lingering questions about the technology’s suitability for m-commerce, with some industry insiders joking that NFC stands for “Not For Commerce.”

At the same time, NFC offers certain compelling advantages in some use cases, and is in any event unlikely to go the way of the Betamax anytime soon.

But as many merchants, handset makers and consumers are taking a “wait and see” approach to the NFC question, leading mobile payment systems developers like Cellum are compelled to follow something closer to “work and see.”

Our mission is to facilitate every possible kind of payment instruments for each customer use case, so that expedience and compliance to the actual payment situation determine the best payment choice for each transaction type,” Zoltán Ács, Cellum’s director of research and development. “And for us, NFC represents just one of many possible choices.

So while the latest iPhone may not allow its users to “tap and pay,” remember that the era of mobile payments may today only be at the stage of home video when the “format war” between VHS and Betamax broke out in the late 1970s – and that the loser in that war evolved into the Betacam professional video production standard that continues to be used to this day.

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  1. Pingback: HCE breakthrough still no solution to NFC limitations | MOBILE PAYMENTS BLOG

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