Is mobile NFC the future of the payments? Pros and cons

As Apple launched its iPhone5 without NFC, lots of us asked the question: is this just a commercial strategy from Apple, or they simply don’t believe in the future of NFC? Many researchers and analysts are desperately seeking an answer for this question, and I would like to put my bet now.

Let’s start from the basics: NFC is a form of radio-frequency identification (RFID) and it enables exchanging data without a physical contact. Important to emphasize that this technology enables a two-way communication, while earlier contactless smart cards offered only one-way communication. NFC can be used for lots of purposes and one of the possible use cases is payment. This type of payment can be done at merchants who are equipped with NFC enabled POS devices. According to the statistics and forecasts, NFC-enabled POS terminals worldwide will increase substantially from 3.9 million units in 2011 to 43.4 million units in 2017. The highest usage is expected to be in North America: 86% of POS terminals in North America will be NFC-enabled by 2017. While in Europe the penetration rate is expected to be 78%.  A bright future for NFC, isn’t it? (Source for the figures)

Let’s have a look at the issue from the customer’s perspective. Let’s assume that Jill and Jane are standing at the cashier in a shop. They both pay 32 EUR. Jill has cash in her hands while Jane wants to pay with her NFC-enabled mobile phone. Jill hands the cash to the shop assistant, while Jane unlocks her mobile. Jill receives the change while Jane starts the payment app. Jill takes the goods she bought and is leaving the shop, while Jane still has to authorize the transaction. Is this that way of payment people will fall in love with? I doubt it. OK, you can say that putting the cash into Jill’s pocket is also an effort and takes some extra time, which has to be taken into consideration. That is correct, but even if Jill uses her NFC bank card, the payment process would be still quicker than the phone because there is no need to start the payment app on it. Moreover, there are some possible issues and risks attached to mobile such as error during the transaction, lost mobile or empty battery.

Am I saying that NFC is dead? Definitely not! When I arrived in London a few days ago the first thing I bought was an Oyster card – a contactless card for transportation ticketing. And I loved it.

Contactless is a great technology. But people do not want to use it just because it is a fancy technology. WAP was also a fancy technology in its time, and nobody used it – because it did not offer an added value for the users. What users want to have is a good user experience and value added services. If providers will add this extra value to NFC payments then the usage of it will skyrocket – and not only NFC but all kind of mobile payments. But NFC payments as they work today seem not to be streamlined enough to convince the majority of the people to use this technology. However I am absolutely certain that NFC will be more and more used: if not for payments than for other purposes, like ticketing.