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NFC: No Flippin’ Chance (or why contactless is a dead tech)

The world is a wonderful place, as times shift fast and
things turn faster than an egg on a timer.

Just as you get used to one technology, another comes along
and turns things on its head.

What technology do we mean?

NFC.

Near Field Communication.

No Flippin' Chance.

The more I think about NFC, the more I realise it is a dead
technology.

NFC is a technology past its sell-by date.

Invented in 1983 – that’s the year Charles Walton filed his
patent for RFID, Radio Frequency Identification – NFC, Near Field
Communication, has been in mainstream usage since the 1990s, when the Octopus
Card in Hong Kong adopted its use for mainstream transportation.

It then gained focus as other subway transport systems
adopted the standard, and payments processors saw the opportunity to incorporate
contactless into their card systems.

Visa and MasterCard put in an effort to get in on the act by
the mid-2000s with Visa Paywave and MasterCard PayPass, and so here we are
today with lots of discussions about contactless payments using NFC and RFID.

But it’s not contactless.

It’s contact payments.

And that’s where I have the issue.

The issue is that I have to touch the terminal with my card
or phone to pay.

Screen Shot 2012-10-01 at 10.18.41

I have a tag to stick on my phone, or a chip inserted
inside, and then I am able to make contact with terminals with my phone to pay.

And that's the issue: why call it contactless when it’s actually make contact.

Make contact payments.

It doesn’t sound so cool, does it?

Maybe that’s why we are all now talking about ewallets and
proximity payments, as apps have taken over from chips.

An app-based near phone communication (NPC) is far better
than a chip-based make contact payment.

That’s why Square and mPowa are far more interesting than
contactless, and when I see that Square signs multimillion dollar deals with
Starbucks, and mPowa is signing up banks to replace their payments infrastructures, I think that change is afoot.

Add onto this the rapidly rising usage of QR codes for tracking and identifying data via mobile, and you realise that NFC has
really had its day.

The problem now is that many organisations have invested
heavily in rolling out NFC terminals and cards, and won’t want to see that
money wasted.

So they will invest in the systems for years to come, only
to see their investments wasted.

A little like Nokia focusing upon phones that work and
Blackberry on email communications, the wave of a new upstart soon drowns the
weak functionality of the incumbent.

And NFC will be drowned before it even gets to be an
incumbent.

Ah well, time to move on … 

About Chris M Skinner

Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, the Finanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here...

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2 comments

  1. I couldn’t agree more. With significant cost of infrastructure to essentially get a few bits of data from a phone to a terminal it seems like a sledge hammer to crack a nut. Using apps and bar codes and QR codes is a simple real world – now – solution. If it takes years for a technology to take off there is something missing in the value proposition no matter how compelling the benefits might seem.

  2. The issue with Bar Codes and QR codes is that they require active participation – the user must launch a code reader app and then focus the camera over the code.
    NPC does offer an interesting alternative. Square’s current iteration it requires the user to either launch the app as they enter the store (not much of an improvement over NFC and much slower a process than tapping a credit card) or granting the app continuous access to one’s GPS data – and presumable data stream. Though the later is far more automated, GPS only works with satellite access (leveraging wifi resolves for this). The issue with automated participation is that the consumer will be leaving a “Square” trail as they encounter locations who have adopted this model . To wit, Square will come to know where and when you were. Yes, they will have all their disclaimers of how they don’t store said data or do so anonymously, but the potential for abuse remains.

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