2011 a set to be a ‘pivotal year’ for mobile payments using near-field communication technology

New NFC smartphones, growing payment ecosystem and industry partnerships should offer big boost to the emerging technology

By Matt Hamblen, Computerworld

BARCELONA — Executives from mobile phone maker Research in Motion and carriers Orange and KT in South Korea today called 2011 the year that smartphone-based Near Field Communication technology will become an important mobile payment technology in many parts of the world.

During a panel discussion at the Mobile World Congress here, the executives cited increasing numbers of smartphones carrying NFC chips that will be shipped this year along with emerging agreements between wireless carriers, payment system providers, retailers and other interested parties.

Research in Motion will ship BlackBerry smartphones with NFC later in 2011, said panelist Andrew Bocking, vice president of handheld software product management at RIM. The BlackBerry NFC chips will run on removable SIM cards to provide security and interoperability among the BlackBerry devices, Bocking added.

Separately, Samsung this week announced plans to add NFC technology to some of its new Galaxy S II smartphones, while Chinese phone maker ZTE disclosed that it will add NFC chips from NXP Semiconductors to its mobile phone devices in the second quarter.

Anne Bouverot, executive vice president of mobile services at French carrier Orange, emphasized the importance of running NFC technology on a SIM card for added security, though she noted that some phones won’t take such precautions. Orange won’t interoperate with devices that lack SIM cards for monetary payments, but “we will certainly use them” for reading tags on smart posters or interacting with other people, she added.

Orange cooperated with other wireless carriers to create an NFC system in Nice, France, which rolled out last year, using Samsung smartphones in a variety of ways, such as food and train ticket purchases, bicycle rentals and coupon distribution. The project also offers NFC users the ability to learn more about objects, products or services associated with historical landmarks, churches, art galleries and the like, according to a video on the Nice system shown at MWC.

Hyunmi Yang, executive vice president at KT, also showed a video showing how KT workers and others in South Korea can use its Olleh Touch service based on NFC technology. The video showed users using smartphone-based NFC technology to make retail purchases, borrow library books and for other activities.

Reports last month indicated that Apple’s next generation iPhone 5 and iPad 2 devices could include NFC capabilities, though the phones likly won’t include removable SIM cards. “The iPhone 5 could have an embedded NFC cover” provided by KT to get around the lack of a SIM card, Yang said.

Users of phones without NFC on a SIM could use a read-only NFC sticker as well, which RIM has used in past NFC pilots, Bocking suggested.

But the panelists also noted that since stickers offer simple read-only capabilities rather than instead of two-way read-write communications, a user would need to have different stickers for each NFC reader he or she encounters. “If you run out of room for stickers on a smartphone, you have to buy an iPad,” Bouverot said.

Bocking said RIM supports NFC and that “the SIM is a key part of that. The goal is to enable the NFC ecosystem.”

But he added that because NFC has taken so long to catch on, it’s possible that new NFC applications will emerge that don’t rely on SIM cards. One example could be a simple application for exchanging business card information between two phones over NFC rather than infrared, Bluetooth or cellular. No monetary payment system would be involved in such an application so security wouldn’t be as important, Bocking said.

The SIM card offers security because carriers can disable it in case a device is lost or stolen. Also, when a person upgrades to another phone, that SIM card can be removed and placed in a new phone.

Bouverot said it isn’t clear what Apple is doing with NFC capabilities in the iPhone 5 or iPad 2, and added “from what I’m hearing here this week, I’m not sure they will have it.”

Yang and Bouvert said the biggest boost to NFC in the U.S. is the ISIS partnership announced last year by Verizon Wireless, AT&T and T-Mobile USA to work with the U.S. unit of Barclays to create an NFC-based mobile commerce network. It’s likely that Sprint will also join the effort.

There are already thousands of contactless readers installed at U.S. fast food restaurants that could be updated to work with smartphones, but having a common payment system that works across various carriers and banks will be important as well, panelists said.

The panel also cited reports that Bank of America is working on an NFC pilot with Visa in New York City.

Yang noted that South Korea-based KT last month announced plans to work with NTT Docomo on a plan to bring NFC technology to Japan, China and South Korea, where more than 40% of the world’s smartphones are used.

Such partnerships indicate strong industry movement toward NFC technology, panelists said. An audience member asked what can be done to convince retailers to install NFC readers or upgrade existing contactless readers. The panelists suggested that once retailers see the ease and convenience that smartphones with NFC can bring, they generally are very willing to pay for readers.

“A lot of locations already have contactless readers activated with a plastic card but retailers see that [the new approach] is just a plastic card in a mobile phone,” Bouverot said. “Users won’t have to worry they left a card in another pocket.” Since carrying a phone is so important to so many people, NFC payments with phones become “very simple and natural,” she said.

Given the emerging partnerships and the upgraded smartphones starting to ship with the technology, Bocking called 2011 “a pivotal year for NFC.”

Using numbers from Juniper Research and others, Yang predicted that some 457 million devices with NFC will be in use in 2015, up from about 10 million today.

Yang noted that contactless readers on NFC were used to check identity badges at MWC and that the NFC panel discussion had to be repeated a second time to accommodate the interest crowds. Thus, she said that the NFC forecasts are likely “underestimates” as a “very healthy NFC ecosystem is [being] built.”

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About MTAM

MTAM is a non-profit trade association for Michigan’s mobile / wireless (connected) technologies industry and businesses in all industries utilizing those technologies. We are the first state-based mobile/wireless industry trade association in the U.S., and our mission is: • to facilitate conversation/collaboration between varied sectors of the mobile/wireless eco-system; serve as the bridge to enable diverse organizations to understand each other’s perspectives and needs in order to drive new innovation and opportunities involving these technologies; • to increase the use of, and demand for, Michigan-based mobile/wireless technology products and services in-state, nationally and globally; • to increase the productivity and profitability of every industry vertical in Michigan via the use of these technologies; • to create sustainable jobs and increased entrepreneurial opportunities in the state based on the use of these technologies, thereby achieving substantial growth of Michigan’s economy; • and to help the communities we serve via the use of these technologies. We are also the statewide producer of Mobile Monday Michigan – a mobile / wireless industry networking and education organization which is a branch of the international Mobile Monday organization based in Finland. Here in Michigan we currently have 4 chapters (Detroit, Ann Arbor, Lansing and Grand Rapids) with over 3000+ members statewide.
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