NFC: While payments struggle, other segments will thrive

Mobile payment systems based on near field communication – increasingly known as NFC – are getting a lot of love from the mobile industry lately. In just the past few weeks I’ve read about new NFC-powered payment initiatives from Vodafone and U.S. Bank — expanding a playing field that already includes such powerhouses as the carrier-backed Isis and Google Wallet – and I’ve been informed that NFC isn’t just for mobile payments anymore.

The problem, of course, is that NFC has yet to gain any real ground as a vehicle for mobile transactions. Google Wallet is reportedly struggling so badly that the company is looking to add a physical card to its system that could be used in lieu of NFC. Isis, which is backed by Verizon Wireless, AT&T and T-Mobile USA, was delayed multiple times before an inauspicious debut last fall. And MCX, a consortium of huge retailers looking to grab a slice of the mobile-payments pie, recently announced that it will initially use mobile barcodes rather than NFC. Those struggles illustrate why financial research firm Celent recently predicted NFC-based payment systems will continue to disappoint in 2013 in most major markets globally.

Beyond the mobile wallet

The news isn’t all bad for NFC, however. Penetration of NFC-enabled handsets is ramping up in a big way, as ABI Research recently pointed out, and the technology shows tremendous potential for all sorts of non-payment activities. (The NFC Forum had that in mind earlier this week when it hedged its bets launched several special interest groups (SIGs) to pursue a variety of NFC-based initiatives.) The most important of these include:

  • Marketing. NFC is a substantially more powerful tool than QR codes here, enabling advertisers to engage with consumers by embedding the inexpensive chips in things like movie posters, retail packages and other marketing materials. Rather than directing users to a mobile site, as QR codes usually do, NFC can deliver content directly between the handset and the marketing collateral. So users can access a video clip or join an email list with just a wave of their phones.
  • Ticketing and transportation. Mobile ticketing typically requires users to open an email or other message to access a barcode, then have the barcode read at the gate. NFC simplifies that process and adds a layer of safety by enabling readers to identify the handset itself as well as the ticket being presented. And as the NFC Forum discussed earlier this week, the technology can also be used to identify baggage and make sure it gets where it is supposed to go.
  • Product packaging. Not only can NFC help retailers track their inventories via chips embedded in packaging, it can be used in the top of pill bottles and elsewhere to ensure patients are taking the right medications in the right amounts and at the right times.
  • Device-to-device content transfers. The NFC Forum is pushing hard to encourage consumer electronics developers to include the technology in its goods, which would conceivably enable users to move their content from a tablet to a phone to a PC with remarkable ease. There are some substantial hurdles here – the most obvious is the fight against piracy – but the possibilities have tremendous appeal for consumers.

I’m not sounding the death knell for NFC-based payments yet – several technologies and countless payment systems are competing there, and it will be a few years (at least) before we can crown a winner or two. In the meantime, these other applications and activities will leverage the wave of the NFC-enabled handsets that has already begun to come to market. App developers and companies across these vertical markets should be figuring out how to take advantage.