Reinventing Commerce: an Introduction to NFC

January 2, 2012 • Blog, Commerce, Mobile • Views: 365

If you’ve been reading any predictions for marketing in 2012, no doubt NFC has topped the lists more than once. NFC, or Near Field Communications, is an emerging technology that allows smartphones to communicate with nearby objects.

NFC has primarily been thought of in the context of mobile payments. A user with an NFC-enabled device can simply bump their phone against a merchant’s receiver, and pay without using cash or swiping a card. This is the so-called “mobile wallet” that Google and others have been pushing for.

Industry excitement is at least partially due to the potential size of the market. A recent report by Aite Group projected that mobile payments in the US will reach $214 billion by 2014

While marketers have been hearing about NFC for years, the technology is still far from mainstream. However, over the past few months, talk of NFC has been heating up, as major players like Google, AT&T, Mastercard, and Paypal step up their mobile payment offerings.

Major Players in Mobile Payments

NFC and the entire mobile wallet space is still early in development, and as such the competitive landscape has yet to be established. Companies interested in NFC are wide ranging – from advertisers like Google, to major financial players like Visa and Mastercard, and mobile carriers like AT&T and Verizon.

Smartphone Manufacturers. NFC relies on a specific chip to be built into a smartphone, and while add-on chips are available, adoption of the technology will rely on devices coming pre-equipped. Google’s Android is currently leading the way, with the Galaxy Nexus models now shipping with NFC. Apple and Microsoft are lagging behind, but rumors point to both adopting NFC in 2012.

Google Wallet. Launched September of 2011, Google Wallet enables users to store credit cards, loyalty cards, gift cards, and other shopping tools, within a mobile app. Availability is still limited, as GWallet works only on NFC Android phones using Sprint, and only at participating merchants. However, although adoption is limited, Google’s partners are strong, including Citi, Mastercard, First Data, and Sprint.

Mobile Carriers.  While Sprint is already on-board with Google Wallet, the other large networks AT&T, T-Mobile, and Verizon, have joined forces to back a mobile payments startup called ISIS. While ISIS hasn’t launched yet, it will offer similar functionality to GWallet, and in the short term, it appears as though GWallet and ISIS will be in close competition as the major NFC players.

Paypal.  Paypal initially seemed uninterested in NFC, however it seems like they’ve recently warmed to the idea, updating their Android app to allow two Paypal users to transfer money by bumping phones. Looking into the future, it seems like NFC could be a powerful opportunity for Paypal to become more active in the retail payments space, an area where they’re currently weak.

Credit Card Companies.  MasterCard was the only credit card partner announced with Google Wallet in May. However, when the service officially launched in September, Visa, American Express, and Discover all signed-on to support Google Wallet. With that said, the major credit cards also support ISIS. For the moment, it appears as though credit institutions aren’t playing favorites.

NFC Beyond Shopping

NFC has applications aside from retail shopping. China is currently using NFC all over the country for public transit, and other countries and companies are likely to follow suit in applying NFC to common micro-transactions.

NFC can also be used for totally non-transactional purposes. At it’s core, NFC is simply a communications system. “Smart” objects could be outfitted with NFC tags, allowing smartphone users to lookup information, visit URLs, and otherwise interact digitally with the real world. For example, Google Places stickers can now be outfitted with NFC, which could allow consumers to quickly check-in, receive deals and coupons, and leave reviews.

However, possibly the most exciting NFC application for marketers could be data and analytics. Many speculate that this is Google’s real goal in advancing NFC adoption. Consider that unlike credit and debit card providers, Google isn’t taking a cut of any Wallet transactions. The entire GWallet business is based on collecting shopping data and using it to further Google’s advertising goals.

When we consider the current state of online-to-offline analytics, NFC seems to offer huge potential. Where current local analytics often rely on call tracking numbers, coupons, and projections, NFC could allow retailers to track online advertising’s impact on retail sales with exceptional precision.

Imagine a connection between AdWords and GWallet that allows advertisers to see exactly which campaigns, keywords, and ads drove which specific retail purchases. This would be a massive advancement in the state of local analytics, albeit one that may be plagued with privacy concerns.

Some are calling this web-to-retail connection a closed loop, that will finally give retailers precise, end-to-end data on how effective online advertising is at driving offline sales. When this connection is finally made, and reaches sizable adoption, it will undoubtedly revolutionize online retail advertising.

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