Near Field Communication, or NFC, is a short-range wireless technology that is already used by consumers in Japan, South Korea and some European cities, mainly for inexpensive retail transactions and train rides.
Reports that Apple might embed NFC chips in its upcoming iPads and iPhones has reinvigorated interest in the technology in the U.S.
The technology
NFC operates at 13.56 MHz and transfers data at up to 424Kbit/sec. over very short distances -- no more than 4 centimeters (about 1.6 inches). NFC operates as both "read" and "write" technology and works between a phone or other device and a receiver, such as a contactless terminal at a restaurant or train station where speed and convenience are desired.
The NFC Forum, which issues NFC technical specifications, calls NFC "inherently secure" because transactions can only be completed at extremely close range.
NFC could be used to transfer data from other devices; for example, NFC-equipped digital cameras could send photos to NFC-equipped TV sets. And Apple isn't the only company that's said to be interested in adding NFC to smartphones and other handheld devices. BlackBerry maker Research In Motion and Google, developer of the Android mobile platform, are both reportedly thinking of using NFC in smartphones this year. Nokia has already manufactured devices with NFC that need to be upgraded to fully conform.
Terminals that accept NFC payments also need to conform to technical interoperability specifications. More than 200,000 terminals in use in the U.S. already accept contactless credit cards, or smart cards, and could be upgraded fairly easily to accept NFC transmissions from smartphones, one analyst said.
For the technology to work, existing systems require a phone to have an NFC radio chip (which acts as a transmitter and as a receiver) and be loaded with an application that enables transactions that are authorized by the phone user.
Under most scenarios, the application would have to be launched just before the transaction, which would be completed when the user touches or nearly touches his device to the receiving terminal. If the user was talking on the phone, he would usually have to end the call in order to carry out the transaction, according to the NFC Forum.
NFC adoption
When it comes to adoption of NFC systems, the U.S. lags behind Japan and South Korea, where consumers use NFC-equipped phones for a range of small transactions, such food and transit purchases or parking payments. A recent NFC Forum white paper reported that transit services in London and some German cities have payment systems that work with NFC phones, and it described a successful 2008 U.S. trial of the technology by California's Bay Area Rapid Transit system, which serves the San Francisco area.
In some of the more sophisticated NFC payment systems used by transit agencies, people with NFC-equipped phones can order monthly travel passes via conventional cellular networks with the backing of a credit card or other billing service.
Obstacles to U.S. adoption
A logjam in the payment systems behind NFC technology has kept NFC from rolling out faster in the United States. The unresolved issues include disagreements over transfer fees collected by banks, which have relied on a successful and well-established credit card system, several analysts said.
U.S. carriers AT&T Mobility, Verizon Wireless and T-Mobile USA have formed a joint venture called ISIS that is working with Barclays' Barclaycard US unit to expand the use of NFC technology in the U.S.
Apple's reported interest in NFC is seen by some as a possible boost to the technology, since equipping iPads and iPhones with NFC chips could bring millions of iTunes users into the NFC market.
An arrangement in which people pay for NFC-enabled transactions using money in their iTunes accounts could exclude banks, credit card companies and other financial services firms from the payment loop. An iTunes-based setup could also potentially diminish the role played by wireless carriers, who might otherwise act as billing agents when phones are used to make payments.
Matt Hamblen covers mobile and wireless, smartphones and other handhelds, and wireless networking for Computerworld. Follow Matt on Twitter at @matthamblen, or subscribe to Matt's RSS feed. His e-mail address is mhamblen@computerworld.com.