How NFC can support digital commerce
Handsets equipped with Near Field Communications (NFC) technology enable people to interact with their immediate surroundings and online services in an intuitive and straightforward way. An NFC interaction requires a deliberate, yet simple, action on the part of the consumer. Rather than scanning codes or inputting text, a consumer simply touches their NFC handset against a terminal to complete an interaction.
For example, a consumer entering a retail store could touch their NFC handset against a reader to check-in, prompting the store to send the shopper personalised information and offers. As they walk around the store, the consumer could touch their handset against NFC tags to receive links to more information on various products. When they come to check-out, the shopper could touch their NFC handset against a point of sale terminal to redeem vouchers, make a payment and collect any loyalty points.
Similarly, a traveller could tap their NFC phone against a reader to pay for a ticket for a train to their local airport. At the airport, the consumer could use the phone again to check-in and board the plane. After landing at their foreign destination, the consumer taps the phone once more to buy a subway ticket. Mobile NFC can simplify the travelling experience by reducing the need to queue, while effortlessly managing different ticket types and payment in different currencies.
Moreover, the use of mobile NFC for payments reduces the need for cash and plastic cards, leading to cost and time savings. NFC services can also store sensitive data securely on the SIM card in the user’s handset, providing surety for both merchants and consumers.
NFC – the technology
NFC is a contactless radio technology that can transmit data at speeds of up to 424kpbs between two devices within four centimetres of each other. Some plastic debit and credit cards now contain NFC chips, enabling people to pay for items by simply tapping the card against an NFC terminal. Mobile phones are also being equipped with NFC capabilities, enabling consumers to use the technology to interact with readers to access information, validate tickets, redeem vouchers, collect loyalty points, make in-store payments and use many other commercial services.
Derived from well-established radio frequency identification (RFID) technology, NFC builds on the existing standards used for contactless card payments. NFC-enabled devices are, therefore, generally compatible with existing contactless card terminals in retail outlets and restaurants.
Critical mass of NFC devices
NFC has widespread support from device makers. In 2012, global sales of NFC handsets rose 300% to 140 million units, according to Berg Insight. The research firm, which says that the top ten handset vendors released almost 100 NFC-enabled models in 2012, expects one billion NFC handsets to be shipped in 2017.
Other analysts report similar momentum. NFC smartphones are reaching a tipping point in 2013 with unit shipments set to surge 156% this year to 400 million, according to Strategy Analytics. At the same time, the number of NFC-ready point-of-sales terminals is set to rise dramatically from 6.7 million in 2012 to 44.6 million in 2017, according to Berg Insight.
The universal integrated circuit card (the UICC, commonly referred to as the SIM card) inside a mobile handset can be used to secure a digital commerce service. The SIM is a standardised and robust mechanism that is used by mobile operators to authenticate more than 85 per cent of the world’s mobile devices when they connect to a network.
Sensitive data can be stored in an applet in a dedicated secure domain within the SIM where it can only be accessed by authorised applications running on the handset. As the applet and the data can be amended, over-the-air (OTA), via the mobile networks, SIM-based NFC services can easily be activated and de-activated if the phone is lost or stolen and services can be re-installed once a new phone is provisioned.
SIM-based NFC solutions also offer an open standards-based platform (rather than closed/proprietary solutions controlled by a single entity), creating a level playing field for all service providers to compete and offer their services to the consumer.
Moreover, mobile operators can use their customer relations and technical infrastructure to support the use of SIM-based NFC services. More than 30 mobile operators in 20 countries have rolled out SIM-based NFC services and many more launches are in the pipeline.
A standardised approach
Selected as a standardised interface by the European Telecommunications Standards Institute (ETSI), the Single Wire Protocol is typically used to connect the SIM card to the NFC chip in the phone. A standardised approach to SIM-based NFC is important to ensure the industry can achieve economies of scale and interoperability, enabling people around the world to benefit from NFC services, regardless of their operator network or device type.