Apple and Google may both be rethinking NFC, as many high profile mobile payments initiatives, notably PayPal's wide-ranging trials, take a cautious view on the new standard, and others focus on more readily available handset inhabitants, such as SMS or even - as seen at Israeli firm Digimo - QR codes.
Some analysts believe the slow uptake of Google Wallet - which was supposed to turn the Android handset into a wallet and place the search giant firmly at the helm of the m-payments ship – is because the service relies on NFC.
To be fair, this is not about NFC technology but its current lack of scale. Wallet launched with one handset, the Galaxy Nexus, and with a single carrier in one country, Sprint. Verizon, which has its own alternative in the Isis carrier venture, failed to activate the wallet on its own Nexus. A year after launch, Google Wallet still only works with one credit card and bank combination, Citibank MasterCard.
This highlights the fact that an NFC ecosystem does not yet exist. Too few terminals have been installed and too few devices included the chips – fewer than 1% of current phones. And debates are still raging over the business model – who controls the customer relationship, along with elements like security and customer support; how revenues and fees are shared.
Digimo founder Yossi Yarkoni made a good point in a recent interview with CNet: “The question comes down to 'who owns the customer?' Why should Apple or Samsung bother putting NFC in devices if they simply hand over that customer relationship to others?”
Many m-payments and m-banking services in emerging markets, the main growth driver, rely instead on SMS, while PayPal backed away from NFC for its recently announced in-store mobile solution, in favour of an app which just requires users to type in a PIN number. The eBay unit's CEO John Donahoe said on the company's second quarter earnings call that he did not see NFC ever making a big impact because it does not add value for the consumer.
“When is NFC going to be ready? Never,” he said. “I think other technology solutions, like what PayPal is doing where you pay hands-free with a mobile number and PIN, provide compelling consumer experiences that don't require the actual use of an NFC technology.” PayPal spokesman Anuj Nayar told CNet:
“History has shown that unless a new technology saves people time or money, it won't reach mass adoption. NFC is a technology in search of a problem. Tapping a phone against a reader is no faster than swiping a credit card. In fact, it can take longer.”