Wireless Payments are Coming!

A flurry of recent reports and articles seem to be confirming the obvious: that in the very near future an enormous amount of payment processing will occur wirelessly at the point of purchase using your mobile phone or other network connected device (for example an iPad). The breakthrough technology that is enabling this transition is near field communications (NFC). Below are the facts pointing to this wireless payment revolution and what you can expect to see.

Near Field Communication (NFC) is being built into new device designs. So exactly what is NFC and what will it mean for the average person? As defined by Wikipedia, ”Near field communication or NFC, is a short-range high frequency wireless communication technology which enables the exchange of data between devices over about a 10 centimeters (3.9 in) distance.” So NFC let’s devices communicate wirelessly when they are within a very short distance. For example, imagine the distance from you to a card reader at the super market or other retailer when you are checking out with your purchases. In order for consumers to use a wireless payment technology – it first needs to be built into their devices they are carrying around. According to The Washington Post, the next generation iPhone – dubbed the iPhone 5 – may have an NFC antenna built into the touch screen. Thus permitting wireless payments. Additionally, the same source is citing the addition of NFC into the next generation of iPads. Now wrap your mind around these numbers. According to Information Week, both the iPhone and Google’s Android platforms which may include the NFC payment capabilities are hugely popular. In the U.S. alone, Apple has sold 16.24 million iPhones in its most recent fiscal quarter, and Google reports that it is activating 300,000 new Android handsets per day. If these devices and platforms support the NFC standard for payments, the infrastructure will develop very quickly.

Adoption of the NFC technology by retailers will follow consumer demand. Having the capability to pay for goods and services wirelessly is only half of the equation. Of course the vendors who are selling you the products need to have the capability to charge you wirelessly as well. The installed base of legacy credit card processing terminals in use is enormous. Additionally, various reports suggest that new terminals are being created at the rate of 1.5 million per year. In order for retailers to adopt a different technology and to purchase the equipment necessary to process NFC payments there needs to be sufficient consumer demand. Therefore, the wireless payment revolution is currently falling victim to a ”chicken and egg” issue. Again according to Information Week, ”Apple has also created a prototype retail NFC scanner, which could be used by small business (think Main Street) to accept mobile payments. Apple may even subsidize the mobile payment device in order to help boost adoption by retailers.” Therefore, the key to adoption may be that the NFC proponents simply pay for the equipment to process payments and provide it to retailers at little or no cost. This will certainly act to ”prime the pump”. According to technology adoption expert Stuart Melling with website hosting company 34SP.com, the tipping point may arrive more quickly than first imagined: ”Often times the first few adopters of a new technology are seen as novelties. However, despite the novelty if a new technology is superior and the early adopters provide a demonstration of that fact – the other secondary adopters fall like dominoes.”

For further information you can read the full Information Week article here.