Soon you’ll be able to pay for goods in U.S. stores simply by waving a cell phone over a reader, or connect with other gadgets by tapping a phone against them.
But there’s a catch. Although new near-field communication (NFC) wireless chips will make it possible for gadgets with the technology to work with each other, the software applications being developed for these devices may not play so nicely together, making it potentially confusing for users.
Last week, Google CEO Eric Schmidt announced that the next version of the Android operating system for smart phones will support NFC technology. Such phones would also be able to transfer information—a credit card number or contact info, for instance—over a short distance. Nokia has said that most of the smart phones it releases next year will also feature the technology.
The technology is already common in Japan, and has been under development elsewhere for years. In the U.S., banks and payment networks like Visa and Mastercard have over the past five years handed out credit cards and key fobs that can be waved over a reader in a store to pay for goods or services.
“There has been a slow process compared to some of the expectations out there,” acknowledges Dave Wentker, head of mobile products at Visa. Wentker is also a vice chair of the NFC Forum, a consortium of companies working on contactless technology that has established common standards to ensure that NFC devices can work together. “The specifications were only completed late last year,” he says, “adding that the forum will begin certifying NFC devices before the end of the year.
But the holdups were not all technical, says Mohammed Khan, founder of ViVOTech, which provides contactless readers used by firms like McDonald’s and Home Depot as well as software to enable phones to be used for payments and other contactless interactions.
“Waiting for the phones was a major delay,” he says, but “it was really mobile carriers that held up progress,” says Khan. This is because they were reluctant to let payment processors share a cut of transactions made through contactless payments. “It took three years to recognize that they could make more money from other apps, which can be very valuable,” says Khan.
Apps for phones featuring NFC could, for example, encourage customers to tap their phone onto a poster in a store to receive a discount or receive more information about a product. They could also be used to keep track of loyalty points, or to offer customers discounts based on their shopping history. Mobile carriers hope to earn money by connecting retailers with such services.
Many of those apps are expected to spring up, though, and there are already signs they will put consumers in a confusing position. Two companies, Blaze Mobile and Bling, provide stickers with contactless chips inside and software for phones that can be used to make payments. Both allow users to share their contactless payment activity on Facebook and offer similar loyalty schemes and discounts. But Bling’s readers can’t be used with Blaze stickers, and vice versa.
Three of the largest U.S. cell-phone carriers—AT&T, T-Mobile, and Verizon—recently teamed up to launch their own contactless “commerce network” that will offer consumers yet another choice. Apple is widely believed to be preparing to add NFC to the next version of the iPhone, using its iTunes system to handle payments and creating another route to a contactless experience for consumers to choose from.
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