Will NFC Become SOP?

What is most promising about a solution like near field communications (NFC) is that it is being designed as a ubiquitous rather than proprietary tool that would serve as a “natural extension” of the existing merchant payment infrastructure, says Christopher Cox, vice president of mobile commerce solutions for First Data Corp.

NFC facilitates mobile payments through short-range radio communications. Despite its infancy in the United States, it is already being used widely in countries like Japan.

As the technology develops, the fact that it is tied to existing payment protocols (like those for credit and debit cards) will reduce security concerns among consumers and merchants, according to Cox, whose Atlanta-based company provides mobile commerce and other payment solutions.

“There are some obvious technology differences there, but the fundamentals of the business model and the infrastructure are the same,” he says.

Merchants will need to upgrade their POS infrastructure as NFC evolves. Device makers have already begun embedding NFC chips into next-generation mobile devices and, while mass adoption is still years away, Forrester Research notes that mobile operators, credit card companies, alternative payment providers and online companies are embracing the solution because it promises to standardize mobile payment methods.

Credit card issuers, along with alternative payment companies, see NFC emerging as a fee-based solution for generating incremental revenues. Services like vending, product kiosks, entertainment, public transportation, parking meters, car washes and laundries are among opportunities observers predict are primed for touchless payment.

Cox says the catalyst will be for existing payment accounts like credit, debit, prepaid, gift and loyalty to be placed in chipsets in NFC-enabled devices, allowing them to be used at the POS “as if it were on a plastic card.”

From a security standpoint, Forrester notes that NFC largely is a transaction verification process that does not expose a consumer’s personal information over the wireless connection.