Payments

An NFC Primer - Some Opinionated Sound-Bites

MEDICICEO

If you are reading this article, chances are that you know more about Near Field Communications than I do...after all, this technology has been around for decades and there are probably more entities dedicated to evangelizing it than there are consumers who pay using NFC wallets.

Nonetheless, I will share the lens through which I look at this new technology. It's a distillation of many years of observations and first hand experiences...and since we live in a 140-character world, I offer it you in quick sound-bites:

First, the headline: 

NFC is here to stay. It is an enabling technology that will spawn many consumer applications in mobile engagement; payments may not be one of them. Despite the fatigue that some in the industry might be feeling, we are just getting started, and the future is bright!

Let's cut to the chase...who are the 'winners' and 'losers'?

The only winners so far are the NFC chip makers, even thought they might still complain that they aren't selling enough of them. At least they made something off the ones they sold. Those who bought them haven't made any money at all, or at least not as much as they had thought they would. Clearly, the NFC chip-makers are making hundreds of millions of dollars selling pieces of silicon that may or may not ever get used by a consumer in their lifetime (considering the shortening lifespan of mobile phones).

On the other hand, the losers are those that have spent hundreds of millions of dollars on NFC related activities...not on the chips themselves, but on wallets, joint ventures and consultants that were supposed to monetize these new chips in mobile phones. Of course, they obviously won't accept they have lost yet, but we can't expect them to.

How about the 'business model'? Is there one?

Of course, there is. It's similar to the one that we had in 2004 when VGA-resolution cameras found their way into mobile phones. What was once a big cost ($5) to absorb is now table stakes. The entities that have made money (think Instagram) or making money off the humble phone camera have had nothing to do with the decision to put the camera into mobile phones in the first place. NFC is no different. Every business case about NFC is just a theory until we have lots of people using NFC in their daily lives, at which point those will all become failed theories.

It's still the most secure payment technology, right?

Yes, just as broccoli is the most nutritious dessert. The NFC-SE level of security already exists in phones that don't have NFC. It's called the SIM, and it's been in there almost ever since phones have been around. Let's also remember that it's the weakest link in the payments chain that results in fraud; a triple reinforced door lock cannot prevent intruders from entering the house through an open window.

Wait, the mobile phone was supposed to revolutionize financial services?

It's already doing it...no, i am not being sarcastic...remember that humble camera? It's being used to deposit checks, make payments (as in at Starbucks), verify ID during account opening, etc. etc. And the location fix and other mobile device/network attributes are making it easy to authenticate users and transactions of the financial variety. And the the fingerprint sensor...OK, the jury is still out on that, but you get the point.

So, why are you still optimistic about NFC?

Because there is a part of NFC that is relatively unencumbered by industry feuds and faulty (or perhaps disingenuous) business models. The contactless communications component of the NFC stack, which is independent of the secure element and it's retinue of courtiers (TSM, wallet, keys, etc.), offers a compelling and jargon-free capability for consumer engagement. It enables the casual tap, the ease of discovery, an intuitive way to engage via the mobile phone...

...The "Click" in the Real World!

This is truly the killer app for NFC. This is an example of why i believe NFC will not go the way of infra-red in phones. NFC is bringing the world of advertising into the fold of mobile commerce, without depending on the payments 'hook'. Companies like thinaire, Tapit and Tagtual are paving the way.

NFC may or may not be about 'tap and pay', but it's definitely about 'tap to engage'.

Aditya Khurjekar

MEDICICEO

Aditya Khurjekar is CEO and founder at MEDICI (formerly LTP, Let’s Talk Payments), the trusted source for global FinTech insights and ecosystem engagement.

Previously, Aditya was a founder of Money20/20, and on the the founding team at Softcard, the mobile commerce joint venture between AT&T, T-Mobile & Verizon. Aditya also held a number of leadership positions at Verizon Wireless, CSG Systems, Lucent Technologies and Bell Laboratories.

Aditya holds an MBA in Finance & Management from New York University and an MS in Electrical Engineering. He lives in Charlotte, NC and works with teams all over the world.