Apps Could Turn Your Smart Phone Into a Wallet

The first near-field communication apps are trickling in, but the handsets that can use them remain in the minority.

Mobile apps have become a gold mine for developers, letting them make money from everything from productivity programs to bird-flinging games. Now the mobile industry wants help from developers to make smart phones even smarter.

Radio message: Taglet allows URLs, phone numbers, and short messages to be transferred from anything carrying an NFC radio tag.

Manufacturers are looking to boost a short-range communication system called near-field communications (NFC) in phones. This is similar to the radio frequency identification (RFID) systems often seen in transit systems such as San Francisco’s Clipper swipe card or London’s Oyster scheme. But whereas RFID systems transmit little more than an electronic bar code, NFC offers two-way communication and lets devices interact in more complex ways.

Some obvious uses for these systems—such as mobile digital payments—have been bubbling under for several years. Such technology is already commonplace in Japan. But in the U.S. and Europe, manufacturers have held back from including NFC chips in handsets until easy ways to use them arrive. Meanwhile, software makers have waited for the hardware to become available before spending money on development.

That may be about to change, however, with the arrival of Gingerbread, the latest version of Google’s Android mobile operating system. Gingerbread incorporates support for NFC, which not only makes it easy for manufacturers to build near-field chips into handsets, but also opens up the technology to a much wider pool of app developers.

The first Gingerbread apps supporting NFC technologies have already sprung up, even though there’s currently just one compatible handset, the Nexus S from Samsung.

One such app is Taglet, an information-sharing system that allows phones to pass details to each other with a swipe (imagine swapping numbers with somebody with a wave of your phone, or getting a city guide delivered to your phone simply by swiping it in front of a poster when you touch down at the airport).

Another early entrant is EnableTable, a restaurant coupon service developed by a company of the same name based in Greenwich, Connecticut. The company implants NFC chips inside restaurant menus and the folders handed to diners at the end of their meal. Users simply move their phones over the check to receive virtual coupons and offers that they can redeem later.

Kevin Gallagher, who started EnableTable two years ago with his wife, Sheila, says that NFC is still in its infancy, but those who get into the field early will have an advantage when the technology becomes more popular. “We saw in NFC a perfect storm of disruption, which is always a good sign and a good place for a startup company to be,” he says. “I think you’ll see [hardware makers] betting heavily on the next new thing and releasing NFC-enabled phones.”

Gallagher could be onto something. Alongside Android, several other mobile companies are on the brink of launching handsets supporting NFC. Nokia has long invested in the area, and Research in Motion is reported to be working on NFC phones. Perhaps most importantly, there are rumors that some of Apple’s prototypes for the iPhone 5 incorporate NFC technology. Indeed, last summer Apple hired Benjamin Vignier, an expert in NFC, to run its mobile commerce products; the company has also applied for a number of patents related to near-field technology.

If enough new devices have NFC capabilities, then cell phones could be used for electronic ticketing, contactless payment, and identity sharing. But some say that inventive and entrepreneurial technologists could herald an avalanche of innovative ideas. “There has been a chicken and egg situation, but with Google’s announcement and the fact that the largest manufacturers will include NFC chipsets in their phones, it could change the game,” says Thomas Husson, a mobile analyst with Forrester Research.

Areas that are ripe for development include marketing, such as loyalty schemes, and games that involve new data sharing. “We will see this ecosystem around NFC apps emerge,” says Husson. “If developers have the tools to innovate—and it seems they will—it will drive things forward.”

Success is far from certain, however. Previous forays into near-field have been tentative, with a tiny number of handsets hitting the market over the years from the likes of Samsung, LG, and Motorola. Only Nokia has devoted significant amounts of time and money into researching NFC over the last few years, and its efforts have failed to make an impact. Networks have seemed equally reticent. In the U.K., the mobile operator O2 ran a trial where mobiles could be used for contactless credit-card payments and travel on the London Underground, but the scheme did not continue beyond the pilot.

Still, analysts remain bullish about the prospects for the technology: Juniper Research suggests that one in six wireless subscribers will have NFC-enabled handsets by 2014. And entrepreneurs like EnableTable’s Gallagher say that, even while the future of the technology is uncertain, developers can play a crucial role in pushing it forward. “Is it a gamble? Sure, any time you start a new business it’s a gamble,” he says. “But I honestly think it’s just a matter of time.”

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