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Can the mobile wallet beat the hype?

Can the mobile wallet beat the hype?

Depending on your level of involvement in the digital industry, you might not have heard of near field communication (NFC) or you’ve heard so much of it you’re starting to wonder if it’s all hype. NFC relies on an underlying technology that wirelessly identifies objects from a short distance through tags that are inserted into pretty much anything. The benefit of NFC over something you’re probably more familiar with like RFID, which is used in key fobs and current forms of electronic payment like PayPass, is that it can send and receive information two ways, where RFID is limited to sending information just one way.

This is a significant improvement over the existing technology because it’s inexpensive, offers an increased efficiency in configuration and pairing, provides instantaneous connection between devices, and it enables interactive advertising opportunities for merchants.

The challenge for consumers

The challenge for adoption is to make it significantly easier and more convenient to use than the typical way we do things already. To become fully accessible, it must permeate our everyday actions in the same way text messages and emails have done. Marty Beard, president of Sybase, strongly believes that “for mobile commerce to take off, industry stakeholders must harmonize their efforts in the same way that led to proliferation of SMS and MMS technologies.”

For consumers to see the value in using their mobile devices as a primary form of payment, it has to find an anchor in their lives and redefine the rituals of their everyday actions. To do this, the NFC forum has developed the three pillars for near field devices: sharing, pairing and paying. They believe that these modes are where it can have the most impact in people’s lives.

The challenge is finding the incentive for consumers to switch from swiping to waving.

For example sharing, like Bump for iOS currently does, allowing you to exchange contact information on the fly. NFC can enable these interactions offline in a more convenient and instantaneous way. It also has the capacity to improve the pairing process between mobile devices and desktops. Imagine no more passwords, bluetooth pairing or router codes. This can all be stored on an NFC chip embedded in your device, and a single swipe is all it takes to verify your digital identity.

The most signifiant pillar is payment. Take Square for example: it enables merchants to accept payments virtually anywhere through mobile devices. The hardware they use to enable credit card swipes is a stopgap implementation—that’s why they’re actively giving Square dongles away for free. Their strategy is less about the hardware they use and more about the service they provide. I imagine that Square would readily adopt NFC-enabled devices when they become standardized and evolve their current hardware solution.

The challenge for merchants

Isis, a partnership between telecom juggernauts Verizon, AT&T and T-Mobile, is actively developing the common standard for mobile payments that they hope will be eventually adopted by merchants. The challenge for merchants is putting faith into the added-value that these new systems can provide their customers, like coupons and loyalty programs.

Google has already integrated NFC support for Android 2.3 and is rumoured to be working with VeriFone to roll out point-of-sale solutions for merchants. Gingerbread users on the Nexus S, can start using Taglet right now and take advantage of contactless information.

The rumour mill is undoubtedly churning around the iPhone 5 and if it will be enabled for mobile payments. Some believe that Apple is concerned about the lack of standards across the industry. Yet others claim they have sources who confirm that Apple is looking at ways of integrating NFC into the next-gen iPhone.

RIM is also working on their own mobile payment solution. “Many, if not most, of BlackBerry devices throughout the year will have NFC in them,” said CEO, Jim Balsillie at a mobile conference last month.

Japan has been using RFID-enabled mobile devices for some time and they’re starting to adopt NFC more rapidly than the west. Mixi, Japan’s biggest social network, will be rolling out new features that enable checking in through near field devices. The advantage of this over something like foursquare, is that it will continue to work in areas where GPS and data signals are weak. But the most interesting implementation are objects embedded with tags that can be shared across their network. Imagine reading a booking or unwrapping a new product you’ve purchased, waving your mobile device over it and sharing it as a status update. This is attractive to merchants because they can embed promotional information into their products which can tie into digital campaigns that run on Mixi.

The merchant perspective is similar to Apples. They aren’t ready to adopt mobile payments and take on the risk of a potentially deprecated infrastructure. They’d prefer to wait for the industry to establish a common standard.

The challenge for designers

How NFC becomes adopted is an exercise for interaction and product designers. The idea that physical objects can talk to each other and exchange our personal information requires designers to have a deep understanding of the spatial dialogue in which they communicate. This is just a fancy way of saying that they need to know how things interact without touching. Timo Arnall and Jack Schulze from BERG, are actively engaged in design research, using prototypes, to experiment with the possibilities of near field devices. They’ve visualized what invisible radio waves look like when an NFC chip and reader are in proximity. They’ve been able to tease apart the nuances in the simple interactions involved in waving your device over a reader.

Possible use cases for the mobile wallet

Use cases for mobile NFC
Source: NFC Forum

These are just some the possible use cases identified by the NFC forum. The designer’s goals is to uncover the pleasurable and motivating factors for consumers to use their mobile devices for payment instead of more familiar and established mechanisms. Consumers are comfortable with swiping their cards and there’s nothing broken about it, so adopting a new technology for them is unnecessary. The challenge is finding the incentive for consumers to switch from swiping to waving. As industry practices and consumer behaviour become adjusted to mobile devices as the primary mode for sharing information and digital identities, we’ll start to see an uptake in adoption. But the question remains as to just how quickly we’ll start to see heavy adoption of the mobile wallet in the near future.

Peter Horvath More posts by Peter Horvath