Thursday, October 13, 2011

NFC - The best enabler for the future mobile wallet?

There has been talk of NFC as a big driver of the mobile wallet since at least 2008, and the idea of using NFC has been toyed with by operators for some time. Anything that adds value to what a mobile phone can do is clearly going to be appealing to mobile operators (especially if it locks subscribers in or has a proprietary element to it), though the numbers of different stakeholders involved is still holding back NFC. Retailers, financial institutions, operators and manufacturers all have a role to play but also all have different vested interests in how it should be deployed.

The curious thing is that NFC is touted as the cornerstone of mobile transactions, mobile payments and mobile banking in the future. The reality is that NFC was never conceived for this kind of use case. Born out of RFID technology, some of the earlier uses were in tracking physical goods (from cows to library books!). This is relevant because security and encryption of NFC is a key blocker for further deployement of mobile payments (or other secure uses, like accessing buildings).

Even though NFC chips can only be read optimally at a distance of 20cm, the radio frequencies emitted can be captured a few metres away. I remember attending a panel discussion earlier this year at the Mobile World Congress where a  PayPal executive was asked what was stopping them from developing mobile payments with NFC. The answer was that it was simply not safe enough.

This could change though -if NTT DoCoMo was able to deploy over 100,000 "NFC keys" to their mobile subscribers allowing them to unlock the front door to their homes with their mobile phone back in 2008, then securing NFC transmissions further should be possible.

I believe though that from securing NFC communication for simple use cases like unlocking doors to that of making payments, there is still a long way to go. But then, at the same time, there are sceptics who still believe online use of credit cards is unsafe, so a great deal will be down to popular perception. Apple...please lead the way....