NFC: It’s Not All About Mobile Payments

Passive NFC Tag

Nearly every review of the iPhone 5 since its September 14th release has made reference to its conspicuous lack of Near Field Communications (NFC). These reviews, almost without exception, have regarded the absence of NFC as a major defeat for mobile payments.  In addition, most reviewers have written their articles in such a way as to give the reader the impression that payments is the only viable application for NFC.  Neither of these is true!

This less than informed reporting does NFC, mobile payments and mobile solutions in general a significant disservice.  To understand why, let’s take a look at NFC, why it has become synonymous with mobile payments and how it can be used in applications beyond payments.  We’ll save the discussion on the viability of mobile payments for a later time.

NFC: A Brief Overview

NFC is a short-range (a few millimeters) wireless communications technology. Think of NFC like you would Bluetooth, Wi-Fi, 3G or LTE except that it uses a different radio frequency, power level and communication protocol to transmit and/or receive information.

There are passive NFC chips, which only transmit information when stimulated by an NFC reader, and active NFC chips, which can be programmatically directed to transmit and/or receive information upon command. Passive NFC chips transmit information that is stored within on-board, read-only memory, while active chips typically transmit information stored in memory external to the NFC chip set.  Both have on-board communication controllers that coordinate the chip’s in-bound and/or outbound transmission of data.

Passive NFC chips do not require an external power source as they make their own energy using the radio waves of the reader.  They possess on-board programming that instructs the chip to immediately begin transmitting the contents of its memory once activated and authenticated by a reader chip.  Active NFC chips require an external power source and are typically integrated into a larger system such as a smartphone.   Active chips transmit information when directed by an external program.

Passive chips are generally about the size of a postage stamp. Active chips are much larger and are typically a part of a chipset that contains a more robust antenna, processor, memory and communications controller.

NFC and Mobile Payments

Today’s contactless credit cards – the ones that you use to tap (verses swipe) on a payment terminal to make a payment – rely upon embedded passive NFC chips.  It is the chip’s function to transmit, wirelessly and securely, a cardholder’s account information from the card to the payment terminal.

Most of the talk regarding mobile payments assumes that a NFC-equipped smartphone can transmit cardholder account information as easily as a traditional contactless credit card.  Most think that the only change to the process is that a consumer need only select their “virtual” card from a smartphone wallet app as opposed to select their physical card from a physical wallet.

In reality, it’s more complicated than the above scenario would imply – particularly the process for getting the credit card information to reside securely on the phone — but one gets the point.

NFC and Other Things

An active NFC chip actually supports three modes:

1)   Card Emulation: This mode supports the mobile payments model. In this mode, an active NFC chip emulates a passive chip operating in a secure card state. (Note that a secure card state is one in which the NFC chip accesses information from an encrypted and protected memory location called the Secure Element.)   Besides credit cards, the Card Emulation mode also supports other card-oriented applications such as building access cards, personal identification cards, loyalty cards, health cards, etc. The Card Emulation mode is designed to support any application that demands the passive (when stimulated by a reader) transmission of secure information.

2)   Peer-to-Peer: This mode supports the direct exchange of information between two NFC equipped phones.  Samsung has been aggressively advertising this capability by running commercials showing consumers tapping their Galaxy S3 smartphones together in order to share information.

3)   Read/Write: This mode allows systems – a NFC-equipped smartphone for example — to read the contents of an external NFC chip and/or write information to an NFC chip.  An NFC chip operating in this mode can be used to support many different applications… none of which is being actively discussed by the press.

A smartphone with an embedded NFC chip operating in a Read/Write mode has the potential to vastly change how consumers use mobile to engage with the physical world.  Take for example Samsung’s recent efforts to promote the Galaxy phone’s use of NFC.  Samsung is actively trying to demonstrate how NFC chips can be used to initiate a broadband communications session between two phones.  Tap the phones together and information such as pictures, videos, music, etc. are transmitted between phones via the Internet.

Samsung has also, through its digital advertising agency, deployed posters throughout select cities and airports to promote their Galaxy line of smartphones.  The posters invite consumers to tap their NFC-enabled phones on the poster’s passive NFC tag to receive additional information about Samsung products.

The Out Of Home agency JCDecaux has done a similar thing with posters installed in bus stops throughout the British town of Reading.  Tap on a poster with an NFC-enabled smartphone and you can receive more information about the subject being promoted in the poster.

Take the poster concept to next level and it is easy to envision NFC tags attached to virtually any real-world object.  Simply tap on an object and you get a plethora of information about that object.  Imagine tapping on a TV in a store and getting product information, technical spec’s, marketing promotions, installation videos, social feedback, programming information, etc. all on your smartphone.  With NFC this “tap for information” model is possible.

There is, however, one last thing you need to know about NFC – particularly the ability to get information about physical objects.  It’s not the NFC chip that is transmitting this information to the smartphone. The NFC chip, in fact, transmits very little information.  The chip is simply conveying instructions to the phone that the phone uses to access the information. The phone is then responsible for accessing the information – either from its own internal storage or from external sources via the internet.

In summary, it is true that the iPhone 5 does not have NFC.  It is also true that it won’t be able to support NFC-enabled mobile payments, but it will be able to support other forms of mobile payments.  What it won’t be able to do is support NFC-enabled peer-to-peer exchanges of information or the NFC-enabled acquisition and presentation of content tied to real-world objects.


2 Responses to “NFC: It’s Not All About Mobile Payments”

  1. NFC is really good idea. I feel major advantage that you does not required to carry your wallet for payment. You just need your smartphone for pay. But I am worried for one thing that, what would I do while batter runs out?

    • Thanks for the comment. NFC is a really good idea. Keep in mind, however, that some mobile wallet solutions will not rely on NFC. But regardless of the transmission technology and communications medium for mobile payments, you will always want to have a backup. Mobile wallets are meant to augment and enhance what we have today, not necessarily replace it.

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