Misunderstood like a 13 year old, NFC will grow into payments

Most smartphone users may not be using near field communications (NFC) now, but they'll grow into it.

If near field communications (NFC) were sentient it would feel as misunderstood as a 13 year old. Most Android smartphone users don’t think they use NFC, which they turn off on to save power because NFC is not associated with the typical smartphone functions and apps, when in fact many people have used other forms of NFC to open a hotel door or to gain access through a rapid transit turnstile.

Arguably NFC is a low-cost, secure, compact, low-power radio with read-only and writeable memory designed for contactless proximity applications of 5 cm or less. It is a fit for many use cases that could be categorized as consumer, non-scary uses like access, and rapid transit mentioned above. NFC is potentially a fit for mobile phone payments, but that will be a second step in the adoption of NFC.

It’s not scary to a consumer to be issued an NFC access card at work that is associated with his identity, and it is not scary for a consumer to use a stored value card that may include a unique or random reference to his identity.

What challenges the adoption of NFC is consumers’ suspicion of electronic payments in general. Some of the factors contributing to these challenges are:

  • Consumers are resistant to entering banking information into desktop ecommerce sites. This is evidenced by the broad adoption of Paypal that promises to protect this sensitive data. Consumers are even more resistant to entering this information into a smartphone. 
  • Consumers are just starting to use smartphones for payments, but it is early in the adoption cycle. Starbucks recently teamed with Square to accelerate the adoption of mobile payments. Square is the product of Twitter founder Jack Dorsey and west coast angels and VCs willing to bet that a new category of payments can be created and consumer adoption affected like the “build it they will come” adoption of Twitter.
  • The mobile phone user has to overcome a natural resistance and adopt mobile payments via NFC, a technology they don’t understand like Bluetooth, Wi-Fi and QR codes and pay using the close contactless communications between their NFC-equipped smartphone and an NFC reader.

But NFC payments could easily become adopted because of non-scary consumer applications of the technology are causing NFC readers to be deployed where NFC cards or keyfobs can be replaced with smartphones. This would be a two-step process that can be explained with two use cases.

  • The San Francisco Municipal Transit Agency uses NFC cards and readers in the turnstiles. Given the opportunity to pay using some consumer accepted payment method such as Paypal or Google Wallet and load value on a mobile phone, many people would opt in for the convenience of using their Android smartphone’s NFC capability to pass through the turnstile rather than sopping at rush hour to reload an NFC card at the station.
  • A frequent traveler could eliminate check-in to and check-out of his favorite hotel. His phone could receive a message with his room number and secure access credentials could be loaded to open the travelers door using an Android smartphone’s NFC capability and the NFC reader already installed in the door.

Consumers need not worry about a lost smartphone because there are many demonstrated solutions to protecting personal information in general and banking and identity information specifically. For instance, Lookout offers a free version that lets the consumer remotely lock and wipe a lost mobilephone.

Convenience will bridge the gap between non-scary NFC applications and mobile banking. When this happens consumers will have little recognition that they are using NFC, except that they will be using it on smartphones instead of cards or keyfobs.

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