Blog: The Case for Staying Confident about NFC (October 2013)

By Randy Vanderhoof, Smart Card Alliance

Once again, NFC is in the news for more of what didn’t happen than for what did. Despite the rumors that Apple would put NFC in its new security-minded iPhone 5S, the annual iPhone new model release announcement came and went without a mention of NFC.

For some mobile industry analysts, this has become a new opportunity to declare “NFC is dead!” because if Apple isn’t interested in it, it must not be everything that industry proponents claim it is.

I have to agree that having NFC available in the hands of millions of mostly young, tech-savvy, upper-income consumers would be an adrenalin shot for mobile payments scheme operators, merchants and nonpayments application developers, and that it would accelerate the consumer demand for NFC use cases like the Isis Mobile Wallet and mobile identity management.

But does the lack of NFC in the iPhone mean NFC is dead? No, it doesn’t. There are many reasons why I’m confident about the adoption of NFC in the U.S.:

1. While four out of every 10 new smartphones bought this year was an iPhone, there are still a lot of NFC-enabled smartphones in the marketplace—100 million in use in the U.S. by the end of the year, to be exact.
2. The fact that the three biggest mobile operators in the U.S.—AT&T, Verizon, and T-Mobile—are committed to NFC for payments through the Isis Mobile Wallet is an important testament to the future of the technology. The Isis Mobile Wallet will be launching nationally at any time, so I will be keeping my eye on that progress.
3. The timing is great for NFC adoption because of EMV in the U.S. As we move to EMV chip payments, merchants will be upgrading their POS terminals and can choose to accept both EMV contact and contactless payments, which by default includes NFC. This infrastructure upgrade can be a big accelerant for NFC technology.
4. NFC technology has many possibilities beyond payments. NFC can enable applications for mobile marketing with loyalty and couponing, secure access to buildings and networks, identity and health care applications, and even just really easy device pairing. Because nonpayment NFC applications can be fast and easy to deploy, it may be these applications that will get consumers comfortable and eager to use the technology.

Lastly, I want to emphasize that I still believe NFC is an important part of Apple’s future. It is in Apple’s nature to wait until consumers are familiar and using technology before jumping in—and NFC is still largely unknown to consumers. I was encouraged to see Apple include the Touch ID biometric reader in the new iPhone 5S and see it as a potential boost to NFC adoption because other smartphone manufacturers often are quick to match anything Apple innovates.

User authentication is essential to any secure transaction and biometric fingerprint scanning is a faster, more secure second factor for authentication than entering a PIN, as most current NFC applications use today. Biometrics could help with consumer adoption—security is still the most commonly cited reason for consumers not to use mobile wallets.

NFC will prove to be important for Apple because it’s a universal standard communications technology that works with all operating systems, and will enable Apple products to connect to the rest of the world’s mobile devices. With Apple leading with biometric fingerprint scanning and raising awareness about its many security advantages, while Android and Windows OS manufacturers are pushing NFC-enabled security, perhaps the mobile industry will ultimately converge on a combination of both.

Since 2002, Randy Vanderhoof has been serving as the full-time executive director of the Smart Card Alliance, a not-for-profit, multi-industry association working to stimulate the understanding, adoption, use and widespread application of smart card technology. As part of its ongoing educational programs, the association recently interviewed some of mobile technology experts for a video series on the state of NFC in the U.S. View the series now at http://www.smartcardalliance.org/pages/activities-videos-nfc-in-the-united-states. Vanderhoof may be reached at [email protected].

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