To NFC or Not to NFC?

I was fortunate enough to attend the CashStar Retailer Roundtable in Portland, Maine, last week. Beyond getting to spend a beautiful summer day overlooking the sights of Casco Bay, I got to hear a lot of great speakers from companies including Google and Forrester Research discuss the latest trends in mobile commerce and electronic gift cards.

One topic that came up again and again was near field communication, or NFC, a hardware-based standard that lets mobile devices send and receive data when they touch or come in close proximity with each other or a physical reader. Based upon general commentary by all speakers, NFC, which so far has been adopted at a much slower rate than once predicted, may never see widespread adoption as a means of executing retail transactions. To explain why, let me quickly review the pros and cons of NFC as an m-commerce tool

With the notable exception of iPhones, most smartphones come equipped with NFC capability, and many of the major in-line POS systems are also NFC-compliant. Thus it represents a common standard that can be easily applied across a wide range of devices. It is also convenient in theory, letting users pay for purchases with a simple tap of their smartphone or other mobile device to a reader (or in some cases even by just waving a device near a reader). Security is not foolproof, but NFC-enabled devices can serve as electronic identity documents and NFC communications can be protected with SSL encryption.

Or Not to NFC…
Android is now the dominant smartphone platform, but 40% of U.S. smartphone subscribers still used iOS devices as of May 2013, according to comScore data. And many retailers are moving away from traditional in-line POS terminals as IT in general moves away from hardware-based solutions and toward virtualized software-based solutions.

Furthermore, the “convenience” of NFC is not always quite as grand as advertised. Steve Arthur, head of retail industry for Google, related a humorous anecdote about getting to the counter at a drugstore, pulling out his mobile phone, entering a PIN number, and tapping the reader four or five times to make a purchase while the confused cashier looked on and customers in line grumbled about how long his purchase was taking.

“It would have been much faster to just pull out a card and swipe it,” said Arthur.

This is not to say that NFC systems never provide quick, convenient transactional functionality, but like so many other things in life the field results do not always match the lab predictions.

The conclusion
The consensus among expert speakers at the roundtable (who included Mark Bonchek from digital strategy firm Orbit, Alex Rampell of TrialPay and Denee Carrington of Forrester Research) was that NFC does not represent the widespread future of m-commerce, but it will not disappear anytime soon, either. Some retailers may want to pursue an m-commerce strategy that is partly or wholly based on NFC technology, depending on factors such as customer demographics, store traffic levels, market basket sizes, average transaction amounts, retail vertical, etc. Others may not see a need for NFC at all.

Hamlet never really answered the immortal question “to be or not to be” that opened the famous Shakespeare play bearing his name, and there is really no one answer as to whether retailers should include NFC in their m-commerce strategy. NFC does not appear poised to become a dominant m-commerce technology as many experts once predicted, but unlike Hamlet is not doomed to an untimely death, either.

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