Mobile phones emerging as payment devices
By Christophe Heurtevent
This article was originally published in Fujitsu's Pervasive Retailing Journal
Even the most optimistic couldn't have forecast such a development. In little more than 10 years, cell phones have become fashionable must-have items, whereas it took the automobile and television several decades to get there. Granted, our current world enables faster progress and technology development, and industrialists and mobile phone operators have remarkably succeeded in making cell phones the ultimate emblem of modern life.
Yet the advent of "cells" is based mostly on man's fundamental need to communicate, without being tethered to wires. The cell phone has quickly morphed into a multifaceted communication device, integrating voice, text, and images, to enable the "anywhere, anytime" mobile lifestyle.
Fueling a digital convergence
Now fully cemented in modern society (some countries indicate more than a 100 percent adoption rate), cell phones are rapidly evolving. Not surprisingly, their capabilities have sparked a digital convergence that is driving the next generation of mobile devices and lifestyle. Cell phones have become cameras, music players, and personal assistants. When equipped with Near Field Communication (NFC) chips, they are even on the verge of replacing automatic teller machine (ATM) cards and classic media, while opening windows of promising opportunities in "mobile marketing" for brands and retailers.
Considering today's targeted marketing plans, cell phones possess two strong advantages: they identify and verify their owners.
Paying with a cell phone
Paying with a cell phone is only one of many possible applications of NFC. It is probably the most promising, though, because it offers a real service for consumers. In Caen, France, it took just a few months for NFC-equipped mobile phones to supplant ATM cards as the preferred method of payment for more than 200 shoppers at the Monoprix and Galeries Lafayette stores.
Two solutions are offered for authentication: either the customer signs a transaction receipt or types a pass code on the cell phone's keyboard. Either way, the cell phone replicates the same functionality as an ATM chip and a payment terminal: identification and authentication.
Cell phone NFC has also been expanded to several other applications: in Germany for bus passes, in Taiwan for public transportation, and in the Netherlands for football club fans!
More secure than Bluetooth
For some, NFC is just one of many emerging wireless technologies. Even if it resembles radio frequency identification or RFID (by its operating mode), and Bluetooth (by the way it's transmitted), NFC has one major advantage: proximity—and therefore precision—of the communication. An NFC chip can only communicate in a four-inch radius (maximum), whereas Bluetooth's operating range reaches more than 30 feet. In other words, it is necessary to voluntarily place your cell phone on an NFC receiver to start the flow of information. It creates a very secure environment and makes it difficult to send unsolicited advertisements.
NFC has a second advantage. Since it's compatible with RFID chips, a customer could even use their cell phone to obtain information from tagged products. Given the rapid cost reduction of RFID tags, this is a huge bonus for retailers. For the price of a couple of Bluetooth sites, you will get hundreds of RFID tags. Furthermore, RFID tags do not require a permanent power supply. They get the necessary operating energy from the radio waves of the transmitter.
Rapid NFC adoption: The next step?
Will NFC payment-by-phone become pervasive? It's a difficult challenge, similar to every technology that implies a device evolution. But given the huge success of cell phones, the fact that consumers are embracing this new way of living, and the sunrise of mobility as an industry enabler, we can reasonably think that this will happen very soon.
Christophe Heurtevent is the worldwide retail and hospitality marketing director at Microsoft.
