The NFC Revolution: Near Field Communication Enters the Fray

Thanks to a new wireless technology coming to some European markets later this year, Coca-Cola vending machines will soon support mobile payments. Consumers will simply have to swipe their phone (equipped with a special sticker tag) near the vendor’s reader to complete the transaction. The service, coming to some 5,000 machines in Belgium and Luxembourg, will soon be integrated into SIM cards in Nokia, Apple, and Android OS mobile devices.

As cool as this new set-up sounds, even more impressive is the innovative Near Field Communication technology behind it. NFC is essentially a “smarter” version of the RFID technology we’re familiar with in our D.C. Metro Smartcards or Visa’s PayPass swipe-to-pay cards. It’s a relatively new standard gaining traction in the mobile community for its versatility as a form of mobile-to-mobile communication capable of transferring anything from data to video to money (read the three ways NFC improves on RFID here).

The major mobile players have already jumped behind NFC. Just this month alone, Apple, Android, and BlackBerry’s manufacturer RIM all revealed intentions to include NFC chips in mobile phones as early as late-2010. Earlier this year, Apple hired a Near Field Communication expert to lead its mobile commerce division. And at the Web 2.0 Summit in San Francisco, Google C.E.O. Eric Schmidt hailed this new technology as the future of mobile payments in the U.S., arguing that NFC “could replace your credit card.”

Mobile operators have also begun to embrace Near Field Communication. Earlier this month, Verizon, AT&T, and T-Mobile announced a joint venture to bring NFC-enabled mobile payments to their combined 200 million subscriber base. The brand, called “Isis,” has ambitious goals, as the initiative’s C.E.O. Michael Abbott explains:

While mobile payments will be at the core of our offering, it is only the start. We plan to create a mobile wallet that ultimately eliminates the need for consumers to carry cash, credit, and debit cards, reward cards, coupons, tickets, and transit passes.

Isis’ biggest challenge will be pulling the major financial players on board, particularly at  a time when most of them are pursuing their own similar ventures. One RFID-based service by Visa, for example, allows consumers to swipe their mobile phones to pay at McDonald’s or part of the NYC subway. Discover and MasterCard also have similar “contact-less” payment options at some vendors. Isis’ success -- and perhaps that of NFC in the United States -- will hinge largely on the extent to which these players can be convinced to jump on board.

While we’re certainly in the midst of an NFC revolution here in the United States, the technology’s immense potential has already been proven elsewhere around the world. In Japan, mobile phone users have been equipped with the technology on a commercial level since 2004, allowing consumers to pay for subway transit, meals at restaurants, and most vending machines in major cities. The development didn’t stop then and there; Japanese mobile operator KDDI recently partnered with a wide range of major corporations, including Toyota and IBM, to bring NFC tech to everything from cars to televisions to robots.

It’s no secret that Americans are reluctant to leave their wallets at home to adopt mobile money, but with the help of NFC this could soon change (in fact, one recent study shows that 89 percent of young consumers are now open to adopting mobile wallet services). But perhaps the most exciting part is that the Near Field Communication revolution is taking place right now. While relatively few NFC chips are floating around in the United States at the moment, major chip-makers expect between 40 and 50 million NFC-enabled phones in the market by the end of 2011.

Mobile money is clearly an exciting and burgeoning market, particularly in developing countries, but it’s important to mention that NFC threatens to widen the digital divide. For the most part, the technology only applies to smartphones and other more sophisticate mobile devices which are out of reach for the vast majority of mobile users. So while some of us start swiping our iPhones at the Coke machine, we can’t forget to focus on making this tech more versatile and accessible for people across the world.