NFC: Never Mind Credit Cards, Pay With Your Phone

One of the emerging trends of the Mobile Web is using your phone to interact with the real world. We're not just talking about 'checking in' to locations, either. There's a world of more practical functionality that hasn't yet ramped up in the West - using your phone as a payment device (for example mobile ticketing), getting special offers from retailers, downloading data from the Web via 'smart posters' on the street, and more.

A key technology driving some of these interactions is NFC, which was one of Gartner's 8 Mobile Technologies to Watch in 2010. It's a technology that you ought to become familiar with; whether you're a technologist, a marketer, or a consumer looking to make the best use of your smart phone (and aren't we all!). So in this post we give you an overview of what to expect from NFC.

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What NFC is & Why You Should Care

As we explained earlier this year, NFC (Near Field Communication) is a short-range communication technology for mobile phones. It's similar to Bluetooth and has a range of about 10 centimeters. There are three main use cases, according to its Wikipedia entry:

1. Card emulation: the NFC device behaves like an existing contactless card;


2. Reader mode: the NFC device is active and reads a passive RFID tag, for example for interactive advertising;


3. P2P mode: two NFC devices are communicating together and exchanging information.

Using the phone to emulate a smart card means that it can be a deployed as a payment device (similar to a credit card), identity card, security device, and more. This type of functionality is already common in Asia, but it hasn't yet taken off in the States.

Using the phone as a reader allows the phone to interact with RFID-enabled objects in the real world, for example posters embedded with chips that connect to mobile web sites or applications.

NFC in Mobile Phones & Services

For these use cases to become a widespread reality, an NFC chip must be pre installed in most mobile devices. According to Dan Butcher from Mobile Commerce Daily, this probably won't happen until 2011 at the earliest.

One issue is that NFC is not a current feature of the iPhone or Android, the tools of choice for many Web early adopters. However one handset manufacturer is showing the way with NFC: Nokia. Its Nokia 6131 NFC phone can be used as a credit card, travel card, loyalty card and a "multi-purpose smart card."

Along with NFC handsets, NFC-enabled services will arise for applications such as mobile payments. As BusinessWeek reported recently, Alcatel-Lucent has announced a new mobile payment hosting service for mobile operators, in partnership with payments systems specialists Clear2Pay and PingPing. However, the article noted that other emerging mobile payment services aren't using NFC - including Nokia Money and Twitter co-founder Jack Dorsey's new business Square (our review).

NFC Has its Issues, But Also The Momentum...

There are issues with NFC, perhaps the biggest being its limited range. In order for NFC to work, you need to hold your mobile phone close to the RFID tag or reader device. An alternative that has a longer range is DASH7, which we'll review in an upcoming post.

However NFC holds the most promise for delivering contactless mobile payments to consumers, along with other real world use cases.

Image credit: nicolasnova

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