Product Strategists Should See NFC As Much More Than Contactless Payments

A year ago, Forrester stated that 2011 would — finally — be the year that Near Field Communications (NFC) began to matter. We predicted that dozens of millions of NFC devices would ship and that the market would start moving away from being niche, although it would still be years away from becoming mainstream. Now that 2011 is coming to an end and it is once again the time for predictions, let’s look back at NFC’s year before we publish our report on mobile trends in 2012 at the start of next year.

I recently got confirmation from trusted sources that 35 million to 40 million would be a good estimate for worldwide NFC mobile phone shipments. 2011 was a game-changing year in that handset makers eventually started to embed the technology in their product portfolio.

Despite the hype about Google Wallet, the reality is that few consumers can use it. It will take a few more years before we reach a critical mass of not just NFC device owners but also users of services enabled by NFC technology. Why? Few services are available now; the out-of-the-box experience is still poor; consumer education is missing; and there’s only limited availability of NFC readers in the retail environment.

Product strategists should stop focusing on NFC as just a contactless payment technology but should instead anticipate new uses for the technology that enable consumers to interact with the environment around them.

Most consumers using an NFC device in 2012 will more likely use it for device-pairing or data-sharing purposes than for payments. Why? Because it can work in a closed loop without the need for NFC infrastructure. Device manufacturers will offer NFC-based multimedia content sharing services, such as the recent Blackberry Tag.

Beyond this, the use of NFC phones as transportation cards could help trigger more mainstream adoption; however, this market is fragmented, and it is unlikely that transportation authorities in dense urban cities will be able to roll out services widely next year.

NFC will also increasingly be used in access cards — perhaps for consumers in hotels or for employees in office buildings. Consumers will also use it for service discovery by waving their phone over any billboard or printed document that has an NFC tag.

NFC will not be restricted to smartphones; product strategists will progressively embed it in other connected devices. The recent strategic partnership between Intel and INSIDE Secure opens the door for new use cases — mostly within offices or at home and on laptops or tablets. Think of using a contactless card or phone for authentication purposes on a laptop, as part of a security layer for consumers transacting on eCommerce websites, or to allow employees to access specific secure areas.


nfc needs time

Thomas, you are right. Small and fast contactless payments without pin-code are very useful, but the infra-structure is still very limited. The list of phones with NFC grows fast, and stickers can help on the customer side. But we see, 50 phones with nfc-chip, is not the same as 50 payment enabled phones. (see Verizon and Galaxy Nexus) Equip every p.o.s. with an NFC enabled terminal also costs time (years).
And please let's not talk about credit-card replacement yet, let NFC prove itself first where its more useful. One minute isn't a problem when buying a refrigerator, but in public transport it's an eternity.
Clients want enabled nfc chips, tag reading, pairing and sharing must work out of the box. Fortunately thats getting better. Nokia does best, shows that nfc is much more than payments. Android and BlackBerry handsets come (soon) with pre-installed sharing app, and teething problems with tags will be solved.
NFC is just beginning, give it some time.

Hopefully we avoid fragmentation and incompatible solutions

Here in Australia, one of the top 4 banks, Commonwealth Bank, have just launch a NFC solution for iPhones which involves using a special iPhone 4/4S case with an embedded NFC chip. I'm hoping that this will be compatible with Google's implementation of the NFC chip otherwise it may cause some issues driving wider adoption of NFC in Australia.


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