Just as ATMs have made branchless banking a reality, it has been theorised for some time now that mobile commerce will make cashless payments a commonality, at a scale much wider and deeper than that enabled by the smart card-based payment infrastructure.

But while mobile commerce has made progress, it is still far from becoming a replacement for plastic and paper monies. This, despite the fact that of late, much development has taken place around an evolving technology called near field communication (NFC) and its promise to make mobile phone-based transactions a reality and to significantly do away with the need to carry cash and credit cards.

For the uninitiated, NFC is a contactless technology that works for small distances of just up to a few centimetres and uses the universally available and unlicensed frequency of 13.56 MHz, so telecom operators don’t have to invest in spectrum costs.

There have been some practical inhibitors for the onset of NFC, the most obvious being the lack of devices, both on the end-user and the terminal sides. For a wide-scale adoption of the technology to happen, NFC-capable phones should become as easy a commonality as an FM or a camera phone. Also, large-scale deployment of NFC-capable transaction terminals would be a pre-requisite, something that is easier said than done.

Having said that, a seemingly small development reported last week could have the potential to put NFC on a fast track. It was reported that an e-payments solutions company Charge Anywhere has developed an Android-based app for Nexus S smart phone that could make the device double up as an NFC payment terminal.

If successful, it would only be a matter of little time that such applications will become available for more Android-based smart phones and also for other platforms like the Apple’s iOS.

This would help rapidly address the requirement of having enough NFC terminals at the merchant sites. That in turn, would accelerate the development and adoption of NFC-capable phones on the consumer side.

Currently, there seem to be around ten mobile phone models that come with NFC support of one form or the other. Also, at least a couple of these devices are feature phones (not smart phones) and provide SIM-based NFC support.

In the overall NFC ecosystem, telcos can play a key role by offering value-added services that can facilitate NFC-based mobile transactions. For example, short codes can be offered to subscribers for creating mobile wallets. These wallets would also form a separation from the subscribers’ bank accounts, thus building a layer of additional security for mobile phone-based transactions. (Yes, for enabling the required backend infrastructure, telcos would need to tie up with banks and payment gateways.)

With NFC-capable mobile devices acting as payment terminals for merchants as well as mobile wallets for consumers, a wide array of transactions would have the potential to become commonplace. Early applications would include mobile ticketing in public transport systems like the metro, but usage can quickly be extended to point-of-sale terminals at super store chains. And of course, NFC phones can also double up as electronic keys for cars and office cabins.

(As published in Deccan Chronicle on March 30, 2011.)

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