Near field communication (NFC) – an innovation in wireless technology – is about to make the jump from the bleeding edge to the leading edge. If you have not heard of NFC, or don't really understand it, you are not alone – but that is about to change. The coming mainstream presence of NFC will present opportunities for consumers, retailers and marketers.
NFC allows the wireless transfer of information between devices at close range. The technology is very similar to Bluetooth, except the devices need to be less than two inches apart for it to work.
NFC has been around for years, powering wireless-phone-to-vending-machine transactions in Europe and Asia, but has only been used in niche applications in North America. It's commonly used in public transportation systems as a stored value card for fares. If you have been to London, for example, and used the Oyster card or Hong Kong, and used the Octopus card, you will appreciate the simplicity and convenience it provides. An example of NFC closer to home is MasterCard PayPass, which has pushed the "tap and go" message over the past few years.
The rapid growth of mobile payments has captured the attention of many organizations including handset manufacturers, wireless carriers and financial institutions. The top smart phone manufacturers plan to release NFC enabled phones in North America this year, which is quite exciting, especially for merchants who have been extensively piloting this technology for quite some time. How exactly mobile phone carriers and banks will monetize the opportunity remains to be seen; will carriers try to have money 'reside' on the phone in order to capitalize on the float, or will banks and credit care companies fight to keep control over micro-transactions?
An eco-system is critical for the commercialization of this type of technology. In other words, it requires both consumers and merchants to adopt this technology at the same time, along with a widely accessible and stable infrastructure to support the system. Remember Dexit cards – the rechargeable, contactless key tag used for electronic payment in on-line or off-line systems? Many technology experts agree the idea was fantastic and technology was sound. It may simply have been ahead of its time, like Nokia's first NFC-enabled phone, which came out four years ago. The product concept was exciting, given its potential, but the limited eco-system hindered the success of the device.
This time, however, it appears NFC is finally ready to hit the mainstream.
Special thanks to one of my consultants, Ontai Lai who helped me research and write this article. Mr. Lai is an Associate at Satov. Next: What NFC means to consumers, merchants and marketers. Look for it at Report on Small Business.
Mark Healy, P.Eng, MBA, is a partner at Satov Consultants – a management consultancy with practice areas in corporate strategy, customer strategy and operations strategy. Mark's focus areas inside the customer strategy practice include consumer insights, customer experience, innovation and go-to-market strategy. He is a regular speaker and media contributor on topics ranging from marketing to strategy, in telecom, retail and other sectors. Mark is known as much for his penchant for loud socks and a healthy NFL football obsession as he is for his commitment to Ivey and recent Ivey grads. He currently serves as chair of the Ivey Alumni Association board of directors. Mark lives with his wife Charlotte and their bulldog McDuff in Toronto.
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