15-Oct-2008 19:24:00
by Tom Godber

NFC - One Day, It'll Be Great

Currently there are two potential candidate technologies for scanning an electronic ticket held on a mobile phone - 2D barcodes (visual scanning) and NFC (wireless scanning). From Masabi's point of view they are interchangeable - just connection technologies for our ticketing services, which can support either - but MoMo London's NFC event this week provided some very interesting confirmation that barcodes will be ruling the roost for some time.

The event had a great mix of speakers, covering the full breadth of the technology from potential use cases right through to a speaker from O2 covering their recently concluded London-based trial. Telefonica/O2 have been the most agressive European operator backers of the technology, and their trial stats were very positive on the surface, but they didn't stand up to much scrutiny.

The headline 80+% approval ratings all came from Londoners who had been given free handsets that they could use as Oyster cards (for travel on the Tube), with free credit to get them started - I'd certainly be very happy with that! The majority of the UK population - and the majority of the European and world populations - haven't been obliged to use a widespread NFC-based network every day for several years, so it is unlikely that these interest levels could be replicated elsewhere.

The most telling thing about Claire from O2's talk, though, was that the trial was so successful that O2 now had enough data for... directing another trial, at some point in the future. Moreover she stated that O2 had decided they were not interested in taking any revenue share from NFC payments, whilst acknowledging that they as the operator would bear the brunt of user support costs for on-phone NFC payments. Does that setup make O2 likely to spend money rolling out a service which will then cost them more money to run, with no revenue upside?

Just to confirm this pessimistic view, Claire declared that O2 would only consider a commercial launch in partnership with all operators, offering a wide range of NFC-enabled devices. However consider:

  • Currently only Nokia have an NFC handset on the market (a niche mid-range feature phone);
  • That handset isn't widely available through operators on contract;
  • No other major manufacturer has announced an upcoming NFC handset;
  • Handset manufacturers will only increase the cost of a device by putting NFC into it if the operators ask them to - clearly, they aren't.

Claire's tone of voice seemed... cautious when she suggested that analysts reckoned it might get big in 2012. Even if we ignore the impact of potential world recession on the technology industry, that seems optimistic:

  • New handsets take time to design and new features require new skills to integrate into hardware and firmware;
  • There is a clear lag between handsets first arriving in the shops and those same handsets becoming widespread, as users usually only upgrade at the end of a contract;
  • Handset upgrade cycles are slowing down as operators try and encourage customers onto 18 and 24 month contracts, instead of the more usual 12 (Orange recently offered me a massive discount for just such a move when I upgraded to Nokia's flagship N96, which contains every feature under the sun - except NFC).

Going mainstream in 2012 suggests a lot of new NFC handsets will be commissioned, designed, manufactured and shipped out in volume by the start of 2011, just over two years from now... possible, but unlikely.

So is NFC living on perpetual limited-scale-trial life support? That may be the case for on-handset NFC, but James from Mastercard hinted at the real future of the technology - already hundreds of thousands of normal credit and debit cards have shipped out NFC-enabled, even if their owners don't have any idea what that means.

It is not a huge leap of the imagination to see NFC as being "cheap enough" to just implement in next generation card processing terminals, so the natural upgrade cycle of those terminals leads to a widespread "stealth" deployment of NFC processing capability - without requiring retailers to actually pay out for a massive infrastructure upgrade so soon after Chip and PIN was introduced. Once the technology is out there, it may start to be understood and used, and once it starts to be used the added advantages of NFC on handsets may be compelling enough - and cheap enough - for a mass market roll out.

Until then, we'll stick to a two pronged approach: 2D barcodes for our mainstream ticketing solutions, and limited scale NFC deployments where the handsets and infrastructure are available.

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Written by Tom Godber