Near field communication (NFC) is a short distance radio communication standard used for contactless communication between devices.
Contactless payment made at some POS (point of sales) terminals today (using credit/debit cards) uses this technology.
Applications may include contact less money transaction and data transfer among others. The communication distance is typically 10cm compared to bluetooth distance of 50m~100m.
Generally the communication is of 2 types:
a) between 2 NFC communication devices (2-way communication)or
b) between a NFC device and a NFC tag (unpowered NFC chip).
The latter of the 2 is used for information reading, similar to passive RFIDs.
NFC standard ISO/IEC 18092 is based on RFID standards which includes ISO/IEC 14443 (standard for contactless IC cards )and FeliCa (Japanese standard for money cards). NFC forum was first formed by Nokia, Philips and Sony in 2004 and to date there are more than 160 members.
Game Changer?
The advancement of NFC into smart devices (mobile phones) is considered revolutionary as it has the potential to change the way people transact money (mobile commerce) and other information. A days outing in downtown SFO revealed that after all, hard cash is not needed anymore. You just need to carry only your mobile phone.
Latest Android phones from Samsung, HTC and others include NFC chip that enables NFC communication. The eco system for NFC communication is a complex one that involves a NFC chip, a smart device that carries the chip with an operating system that handles data securely, targets (POS or Tags for example) that has read/write capabilities to communicate with the device and a backend server at the bank.
As the communication path is extended to 3 or more parties at the least (eg: buyer, seller and the bank), data security over the channel becomes crucial. The NFC forum is responsible for the NFC standard that ensures secured connection.
Logo for NFC enabled devices:
When you see the logo attached to a device it means the device is NFC enabled and therefore a contactless payment option is possible between your device and an NFC enabled payment terminal.
Security concerns:
Due to its shorter communication distance NFC is less prone to attack compare to other contactless communications, however it is not without risk. Eavesdropping and unauthorized data modification (or jamming), relay attack and open access to lost NFC device are some risks associated with the use of NFC. Depending on the mode and design these risks are covered to a large extend.
Read ‘NFC Security’ for further details: www.nearfieldcommunication.org/nfc-security.html
Commercial scope to replace cash, plastic cards and our wallet:
Analysts estimate that NFC will make into 1.95 billion smart devices over the next 5 years. Total transaction that happened via plastic cards in the last year was at an astonishing $21.6 trillion. Only 1% of total transaction was using NFC, amounting to $24.6billion!
One can see the apparent opportunity arising from NFC when it sips into mainstream transactions, replacing the Visas, Masters, AMEXs and Diners.
No wonder these guys are scrambling to make deals with Samsung, AT&T, Verizon and the likes to offer their own version of NFC enabled devices.
Google included NFC in its Nexus 4 phones, Samsung has introduced S-Beam in its latests phones, Microsoft is planning to include NFC in its upcoming smartphone OS. The only exception was Apple as it was counting on its own patented technology called the iBeacon which uses low energy bluetooth instead. Recently Apple filed a patent (US20130211971) with extensive claims on NFC elements indicating that they too might enter the NFC field very soon. May be we will see it in iPhone 6 scheduled for summer release. With all the major smart phone makers designing in NFC in their devices it is just any bodies guess how important this feature would become. So far, 150 million NFC enabled devices are out there. I.E Market research estimates that $950billion would be transacted through NFC enabled devices within the next 5 years.
There is a lot of opportunity to make money from NFC.
Companies making NFC chips:
The leader in this category is NXP Semiconductors
Companies making NFC tags:
Numerous companies make NFC tags starting from $1 range that includes Samsung ‘TecTiles’ and ‘TagsForDroid’, Tag2 .
NFC integrators:
NFC integrator enables the communication between a smart device, a POS target , and the backend server that validates ID and provides secured data transfer. Eg: Nexpert, Tapit, NFCEngine
NFC Apps for tag read/write:
A great application that works well with Samsung and other android phones is the NFC Task Launcher. Helps create custom NFC tags to perform set of preprogrammed action with a single tap.
For interested readers here is a link that explains the NFC communication and its uses www.youtube.com/watch?v=Gbv2BIi9i58
Its good to keep a close watch on what’s happening in the NFC field before it expands and suck us all by surprise! May be we should keep some currency notes to sell as a collector’s item in the future.
What is your view? Will this happen in 5 years? 10 years? Or it will never be the case
authored by Srinivasan
References :
The Motley fools: “The plastic in your wallet is about to go the way of the typewriter...the Palm Pilot...and the 8-track tape player....” dated 17Jan 2014
NFC Forum
NFC World
Wikipedia
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