NFC telecom's next big thing?

As the worldwide telecommunication industry rapidly comes closer to the tipping point of unstoppable commoditization of its current core business – voice and SMS – the leaders of innovation are looking into new ways to boost value and bring telecom once again to the forefront of the hottest industries.

Nicu Pana

Near Field Communication (NFC) is an emerging technology that brings new business possibilities to mobile operators and others. It all comes down to a chip that is mounted on the back of the phone, onto a MicroSD or the SIM card, allowing the mobile phone to send information to an NFC-enabled reader.

The main current use of NFC chips has been micropayments via mobile phone, such as paying for subway ticket by just waiving your handset in front of a terminal at the tailgate.
Obviously the sky is the limit as long as the integration between the phone operator, bank and service provider is seamless and really customer oriented.

The NFC World Congress in Nice between September 19 and 21 is the premier event for the industry as it gathers all the captains of industry, movers and shakers. BR’s correspondent has followed closely all the recent developments in this area and included some of the highlights in this report.

The 1,300-strong audience of the congress seemed to point to a movement that is about to get closer to the mainstream rather than just the experimental, geeky fringe of a few years before.
NFC holds the promise that everyone’s smartphone can actually become the personal gateway to a highly complex, multilayered digital life that includes personal finance, wellness, household administration and so on.

As Ann Bouverot, chairman of the GSMA (GSM Association, the worldwide lobbying body for mobile operators), neatly sums up: “We now know that 75 percent of the people who own a mobile phone simply won’t leave home without their
handset or if they do, they come back to get it. That might mean the mobile phone is the most important thing a person owns.”

Most European countries boast mobile penetration levels of well over 100 percent and, worldwide, mobile penetration is currently at a staggering 50 percent if you consider the most generous recent figures. There is simply no other category of end user products, except probably light bulbs and electrical sockets, that can beat the reach of mobile phones.

Once you have such infrastructure that is by and large globally interoperable, the next logical step is to cram other services into the worldwide web of mobile phones. ISIS, the American association of all major mobile carriers, set out with a clear mission to provide Americans with a parallel financial system for payments. The initiative set them on a collision course with the banks and the likes of Mastercard and Visa.

Meanwhile, the European and Asian side of the industry quickly came to the obvious conclusion that working with banks and Mastercard/Visa was the only way to advance the new industry and not risk transforming it from a shiny future promise to a “legacy technology overnight” in the words of Jorn lambert, head of group at Mastercard Europe.

The hard facts: the phones
There are currently just two NFC-enabled handsets on the market: the Nexus S and Samsung galaxy SII. All other smartphones can be retrofitted with NFC. There’s even a hard case add-on for iPhones but that tends to make the phone a bit clunky and pocket bulging. Granted, more than 10 million Samsung Galaxy S2s have been shipped already but the current limited choice of handsets makes life a bit more difficult for marketers. Luckily, in Nice manufacturers announced more than 15 NFC-ready models by the end of 2011.
Samsung’s VP, Hankil Yoon, said: “In the future all Samsung mobile phones will be NFC-ready regardless of the operating system, android, bada or windows.” Coming from one of the behemoths of the industry that definitely sounds like a commitment to NFC.

The users
There are currently 500,000 users of Cityzi, the window case NFC service in Nice, France. Users can flash their NFC phone to get on all buses, trains, amass loyalty points in a centralized consumer reward program and retrieve information from all NFC-embedded info points. Marseille and Tulon are tipped to follow suit by the end of 2011.
Local governments and city halls have a rather pivotal role in deploying NFC for the masses as they open huge systems such as public transportation to NFC deployments. The top down approach seems to be working better than the American initiative.
Orange, SFR (a subsidiary of Vodafone) and Bouygues are all involved in the NFC movement and are pursuing programs to push the services to the market.

NFC beyond mobile telecom
There’s life for NFC beyond the apparent dependency on mobile operators. The system started off as a way to secure access to homes. It is nothing more than a clever replacement of metal keys. In fact, the access cards currently used to gain entry to buildings already contain an NFC chip. However, you can easily take it one step further. Using rather plain vanilla software you can program your key, for example, to work only between certain hours. You can program yours as a year-round key and only give access to the maid on Tuesdays from 10.00-14.00 for example.
Most of the Korean Universities in Seoul give their students NFC tokens that in effect work as a student ID and pass to clear access to dorms, cafeterias, classrooms etc.
There is currently a project that will incorporate NFC into your car locks and make them smart. For the ever annoying problem of parking meters and highway tolls, NFC promises hassle-free no-stop passage (as long as your credit card is good to pay for it).

Back to business
However when the floodgates are up, you may be sure the mobile operators will be at the helm of the NFC ships, but it will take a lot of work to provide a fool-proof global standard to ensure interoperability. Currently the NFC forum is writing down the specs in an attempt to even out diverging developments. At the moment deployments in the US, Europe and Japan do not work well together and that is a real killjoy for all the technology enthusiasts.
There also seems to be a certain degree of confusion in terms of the business model per se. The small transaction fee (smaller than the typical banking transaction commission) works just fine for large systems such as public transportation, but that requires hundreds of thousands of customers who make recurrent transactions to add up to an interesting grand total.
For the other obvious main use of NFC, couponing and vouchers, the story is not written. For one thing, the granularity of the retail universe is such that, no entity can possibly sign up and maintain a roster of relevant and up-to-date networks of vendors to run NFC-enabled POSs. The obvious candidates though in retail are the large clothing, fast food, electronics chains and so on.
McDonalds currently has a pilot project through which you can order fast and pay with an NFC phone. Your correspondent gave the system a shot and even though he was not successful himself, many others seemed to have no problem in getting it done and cutting their waiting in line time. Yes, people on the Cote d’Azur do eat out at McDonalds, the Ferrari-driving types included, as eye-witnessed!

What’s in it for us?
Luckily for this country we are in a position to be able to take immediate advantage of any global development in telecom. The premier data connectivity infrastructure and access here make it even more likely that initiatives like NFC will quickly be integrated into product line-ups.
Romania is a very coupon and voucher happy country, even by the standard of highly developed economies. We could imagine hypermarkets implementing NFC programs with mobile phone operators and banks. At the cashier just flash your NFC phone and forget all the plastic that turns your wallet into a messy lump of nonsensical rubbish. QR codes, currently all the rage in advertising, are a rather roundabout geeky way to link technology to traditional advertising support.

NFC has a rare capacity to be a natural gesture-based technology. Waving a badge or a card feels natural, just like waving your hand at someone. That’s key to understanding consumer behavior. Similarly, the single biggest advancement for iPhone to take the handset market by storm was how easy you could do things with your phone by just dragging your fingers across the screen. Gesture beats typing just as talking beats miming.

The subway season ticket can actually reside in your phone along with the key to your home.
That obviously invites the single most important question that has not yet been addressed here: how safe is this? And can you make sure no one steals your phone-wallet to abuse your identity or funds?

It’s as simple as when you misplace your phone. Just get another one, call your operator, answer the security checks and get the NFC blocked. That will automatically block out all transactions on your credit card or access to any other NFC-enabled property.

This is actually the very reason why mobile operators insist that any deployments other than straight on the SIM card are less secure, as one cannot get in touch with any personnel for the handset or MicroSD manufacturer. Or in that case, when you call the bank, customer service can handle the security concerns but will not be able to restore good working order if the NFC device has a hardware problem.

Still not convinced on just how secure NFC can be? The simple fact that the mobile operator is the middleman should be the guarantee you need. Just one last quick example: M-Pesa, a money transfer service offered by Safaricom in Kenya has already signed up 40 percent of all Kenyans.

The next best thing to a bank account is a SIM card and a phone.
Since high-net worth AT&T customers on Wall Street and USD 1-a-day poverty-ridden Kenyans both use a mobile phone-mediated expeditious and secure financial service, this is hard proof all major tests for security have been cleared.

Near Field Communication has the potential to position the mobile phone industry at the very center of end users’ digital universe and we happen to be right now on the cusp of making that happen, or not.

Nicu Pana

Telecom Consultant

Strategy & Sales Management

Nicu.pana@telsign.ro

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