Near Field Communication (NFC) is a close proximity, wireless communication, similar to RFID tags found on contactless cards. By embedding NFC chips in a mobile phone, consumers can “wave” them at special readers in retail outlets to make purchases.
The concept is based on Japan’s Osaifu Keitai, which uses a similar technology called FeliCa, and has been empowering mobile phones to make purchases, buy tickets and act as a transit card for over a decade.
Currently, the biggest hurdle to customer adoption is the lacklustre range of NFC-enabled mobile devices, although the list seems to be growing. In the meantime, Mastercard and Gemalto are addressing this shortage through their jointly developed NFC-enabled SIMs, which are been deployed across Orange’s network in France and UK, enabling support across existing mobile phones on its network.
Apple is considered to be the key for mobile payments to gain market acceptance. Until last year they had showed concern with the standards and had decided not to support NFC on the iPhone. They have instead been supporting the mobile payment solution from Square by selling it on the Apple Store. However, recent hints suggest that it is now actively exploring NFC and will likely be adopting it in the new iPhone this fall.
While the ecosystem for mobile payments should be ready soon, consumer uptake will likely depend on demonstrating value by building additional services around NFC, as well as providing them with easier transactions in a secure way.
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