Nokia Corp.’s decision last week to include an NFC chip in every one of its smart phones starting next year finally could help move the technology from scattered worldwide pilots to a major rollout and widespread consumer adoption, observers say.
NFC’s primary setback has been how the card brands, issuers, mobile operators and handset manufacturers divvy up transaction revenues. Who would pay for the NFC chip also was an obstacle.
“This is a very positive development for NFC,” James Anderson, senior vice president of mobile at MasterCard Worldwide, tells PaymentsSource in a statement. “To have the largest phone manufacturer in the world commit to add NFC technology to their smart-phone line is an important milestone.”
Nokia’s decision to include an NFC chip “might put to rest the notion that banks would have to pay for the hardware,” says Red Gillen, a senior analyst in Celent LLC’s banking group.
Handset manufacturers and wireless operators can position the NFC chip as more than just a payment tool, Gillen says. Other uses could include mobile couponing or communication with other NFC-enabled devices such as movie posters that feature showtimes.
Adding the chip also could turn Nokia into a significant player in the payments space, says Matt Simester, a director at Auriemma Consulting Group. “From my perspective, it’s about ownership [of the chip],” he says. “Maybe the thought is [Nokia] can be in the payments business.”
Whatever the reason, Nokia has forced the NFC issue (
Other handset manufacturers will be compelled to add NFC chips to their phones, Simester says. The card brands and issuers also will have to approach Nokia to find a space on the chip, he adds.
“This is going to shake things up,” Simester says. “Now there is a fixed point in the market, and there is something [for the industry players] to aim at. There will be a lot of business-development conversations in the next 12 months.”
MasterCard and Citigroup Inc. will be among the organizations in the mix.
Citi last year piloted NFC in India using Nokia 6212 phones that could make contactless purchases at approximately 400 merchants. The test involved some 5,000 consumers (
The pilot was not just about the consumer experience, Jeff Semenchuk, Citi head of growth ventures, told attendees last month during the 2010 Payments Conference sponsored by the Federal Reserve Bank in Chicago. “It was also a business-model trial,” he said.
MasterCard’s PayPass contactless application was on the chip Citi used during the pilot.
MasterCard’s Anderson considers Nokia’s decision to be “a turning point, as the industry participants can focus now on commercial-scale implementations and on building out a range of compelling consumer services.”
Despite the lack of NFC phones, industry players already are promising major NFC rollouts in the near future.
Orange, a France-based wireless operator, earlier this year announced two separate plans involving NFC-chip manufacturer Gemalto NV and Barclaycard. Orange and Barclaycard partnered to eventually deploy NFC-enabled mobile phones (
Orange declined to comment on Nokia’s announcement.
In another sign the NFC space is about to spring to life, Irvine, Calif.-based chip-manufacturer Broadcom Corp. announced it will be make a $47.5 million offer to purchase NFC chip maker Innovision Research & Technology PLC. United Kingdom-based Innovision has partnered with a major handset manufacturer to develop “best in class” NFC chips, according to its website.
While Nokia’s announcement paints a rosy future for NFC, the consumer ultimately will decide the technology’s fate, Auriemma’s Simester says. “The technology, for many people, is still considered a fad,” he says.
Technology buffs and young adults likely will be early adopters in the United States and the UK, he adds.
The key for widespread adoption will be convincing consumers NFC is safe to use. “Not one institution will reassure people,” he says. “It will have to be an industry-wide effort.”
