Android will give NFC a boost, but challenges remain

Getting the necessary readers into stores will be a daunting task, analysts say

Android-based smartphones with NFC (Near Field Communication) will help turn mobile phones into wallets, but there are issues that have to be solved before that happens, according to analysts.

On Monday, Google CEO Eric Schmidt announced at the Web. 2.0 Summit that the next version of Android, code-named Gingerbread, will support mobile payments and he also showed an upcoming Android-based smartphone with an integrated NFC chipset.

"We think actually that Android devices should support [NFC]," said Schmidt.

NFC is a short-range wireless technology that, for example, can be used to make contactless payments.

Backing from Google is undoubtedly a step in the right direction for NFC, according to Howard Wilcox, senior analyst at Juniper Research. Sandy Shen, research director at Gartner, agrees: "It will help remove the hurdle that the lack of phones has so far posed."

Besides Google, long-time NFC backer Nokia has announced plans to integrate the technology into a number of its Symbian-based smartphones in 2011. The Nokia C7, which started shipping in October, has an integrated NFC chip, but the smartphone needs a software upgrade for it to work, according to a spokesman. Nokia hasn't decided when the upgrade will be available, he said.

There have also been rumors about Apple adding NFC to the iPhone.

However, a lack of phones with the technology isn't the only adoption challenge facing NFC, according to Shen. For example, for NFC payments to work in shops, retailers will have to be persuaded to install readers, she said.

The business-case for banks and mobile operators, which also have to be involved for NFC to work, isn't clear, according to Shen.

NFC could help operators reduce churn, according to Wilcox. The more services that are on the phone, the harder it will be for users to switch operators, he said. However, it is difficult for operators to quantify that effect, he added.

All the involved parties will have to agree on how to share revenue, as well, according to Wilcox.

The most talked-about application for NFC is payments, including ticketing. But the technology can be used for other things. Recently, Swedish operator TeliaSonera started a pilot that will test using NFC-enabled phones as hotel keys. Guests will be able to check in and receive the key directly onto their mobile phones before arriving at the hotel, it said.

Users will can also tap on so-called smart posters with their phones to collect retail offers and other kinds of information or swap items like business cards or calendar notes by tapping their handsets together.

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