Pay by phone?
SAN FRANCISCO — A simple wave, and you’ve paid. That’s the simple idea behind a technology now being developed to turn your cell phone into an electronic wallet.
Near Field Communications is an extremely short-range wireless technology that can be built into a semiconductor chip. NFC chips can send and receive data over short distances of up to 10 centimeters or 4 inches. This enables what promoters call “contactless” payment. NFC chips are being built into cell phones and tested in high-traffic locations like coffee shops as a quick, cash-free alternative to debit or credit cards.
NFC is a two-way version of the contactless payment cards already being used in many transit systems like the London Underground. In transit applications, consumers wave a one-way payment card over a receiver that triggers the turnstile. The feedback loop in the NFC chip is designed to make it a safer and more versatile payment system. “NFC carries encrypted information to add a layer of security,” said Elvira Swanson of Visa Corp., the credit and debit card giant that is testing NFC in commercial settings.
Visa, MasterCard and American Express are all among the members of the NFC Forum, an international group of technology and financial firms working to set standards for this new form of payment. The Forum was founded in 2004 by Nokia, Royal Phillips Electronics and Sony Corporation, which collaborated to pioneer this short-range, two-way wireless technology. Over time the Forum has been joined by dozens of firms including Microsoft and Hewlett-Packard, mobile carriers Motorola and AT&T, and cell phone semiconductor-makers Qualcomm, Broadcom and Inside Contactless.
Jonathan Main, a vice president with MasterCard’s Advanced Payments division in London and the chairman of the Forum’s technical committee, said years of development and dozens of trial projects have been undertaken to make sure the technology can work across a wide range of chips, phones and electronic payment systems.
Will it work?
Despite its potential and its impressive list of backers, NFC must overcome the same chicken and egg problem that faces all new technologies — there’s no incentive for hardware vendors to build it into their devices until contactless payment has real-world uses for consumers.
Toward this end, Visa recently joined three other key partners to test NFC as a substitute for cash or debit transactions in the Malaysian metropolis of Kuala Lumpur. Its partners include Nokia, whose 6212 handset already incorporates NFC capability; Maxis, the largest wireless carrier in Malaysia; and Maybank, which issues Visa cards and supports Visa’s NFC transaction system, payWave.
The test illuminates the complexity of deploying NFC systems — will Malaysians with a Maybank account, who own the properly equipped Nokia phone and have Maxis service, find it convenient to use this point-and-pay technology at roughly 1,800 stores equipped with payWave? And will the technology work seamlessly in heavily-trafficked, quick-turnover settings like fast food kiosks?
In addition to being useful in stores, the NFC system being tested in Kuala Lumpur will let users wave their phones for admission to train stations, buses and parking garages that have also been wired to accept the new payment system. Visa’s Swanson said her company thinks the ability to use NFC-equipped phones to access transit systems will makes the technology useful to consumers on a daily basis and build the habit of thinking of the phone as a payment device.
“We see a focused roll out of NFC around transit hubs,” said Swanson, such as London, New York and other metropolitan areas where the pace of life favors point and pay systems.
It remains to be seen whether consumers will accept NFC as an alternative to cash or plastic. Meanwhile, other ways may be found to turn the cell phone into a payment device, perhaps by figuring out how to do secure transactions via text-messages, or using the Web-access built into many phones.
But one way or another technology firms hope to unlock the payment potential of cell phones. The fact that they are in so many hands makes them targets for what could be the next big killer application.
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