NFC Technology Looks for a Foothole in the Payment Processing Market

Author bio: Rene Henry runs an e-commerce business through his mobile phone–he can’t imagine life without it.


NFC - Near field communication / contactless paymentsTechnology is improving the way we conduct payment transactions, but merchants and consumers haven’t quite settled on a common system. Near-field communication (NFC) devices use radio signals to connect at close range, and this technology comes to retail world in the form of mobile wallets. NFC software stores financial information on smartphones, enabling consumers to scan their devices at the checkout instead of paying with cash or swiping a credit card. The advantages are clear: quicker transactions and the potential for increased security and future mobile enhancements. Despite this, however, NFC payment technology has yet to catch on.

Strategy Analytics recently slashed its forecast for future NFC-based mobile payments. In May, the firm projected that NFC mobile payments would reach $1 trillion by 2017. An October report dropped that number down to $48 billion. Concerns over standardization and competition from mobile credit card processors has NFC-based technology struggling to get a footing in the market. Security concerns also accompany this potentially revolutionary technology.


Retailers are excited about the prospect of cutting down the average time per transaction, and there are other potential benefits as well. Mobile wallets could make it easier for for retailers to establish loyalty programs for customers. In a typical grocery store rewards model, customers sign up for rewards in exchange for personal information. With a mobile wallet, retailers could offer discounts in exchange for advertising on devices. It’s an easy way to build brand loyalty.

A mobile wallet could also provide valuable buyer habits and customer analytics. If a grocery store knows that a customer likes a certain steak, it could set up automated alerts when that cut goes on sale. These digital transactions will make for smarter shopping and advertising, a win-win for both merchants and consumers.

Coffee giant Starbucks has embraced the mobile wallet. Engadget reports that 10 percent of Starbucks transactions take place with the Square Wallet, an NFC-based system.

And Concerns

As with any new technology, NFC-based mobile systems have their fair share of concerns. Fraud and identity theft are chief among potential problems. Mobile malware is still in its infancy. Google security engineer Adrian Ludwig estimates that just one in every 100,000 Android apps poses any security threat, according to If mobile phones contain great abilities and more sensitive information, nefarious hacker will inevitably follow. We’ve already seen examples of SMS phishing in which a fraudster sends a text message with a link asking for sensitive information. Smartphone makers and service providers will need to prove that their devices and networks are reliable if NFC technology is going to take off.

Processing Competition

Mobile credit card processors are also standing in the way of the mobile wallet. Companies like Square, Paypal and Intuit are making it easier for small businesses to accept credit cards—in fact, the leading mobile processing provider Square is on pace to process $15 billion in payments this year, according to NFC-based mobile wallet providers must match the convenience of these systems for small businesses if they hope to compete.