The answer to the first question is easy: NFC is short for Near Field Communication, a simple, very short-range wireless communication technology (similar to RFID), which can be used for a “contactless” payment between an NFC-enabled device and an NFC reader at a retail checkout or a public transit turnstile, for example. NFC is a very hot technology right now, and is becoming widely used for low-value payments, such as transit fares, in some parts of the world like Japan and Korea.
The answer to the second question is a bit more complicated. NFC is being used in Canada—the VISA payWave card is an example—and a few companies have run limited trials with NFC smart cards. But everyone is holding their breath for the really big implementation: mobile payments, where NFC-enabled smart phones are transformed into “mobile wallets” and associated apps could compare prices with other vendors, download a warranty or instructional video, connect to a reward program, and integrate the payment record with financial management software, for example.
NFC technology isn’t a hurdle and smartphones are everywhere, so what’s the hold-up in North America?
The reasons have to do with banks, merchants, competing technologies and jurisdictions, and payment associations. In its recent strategic plan, Vision 2020, for example, the Canadian Payments Association is hedging its bets. Although it says that “emerging payments, such as mobile payments are set to grow and could replace payment cards as the next dominant consumer payment” it also admits that there is no existing CPA framework for mobile payments, and says only that it will “further explore opportunities in this area.” This despite the potential efficiencies that the financial services sector would realize if electronic payments become commonplace for small purchases.
A recent study by the Federal Reserve Bank of Boston is the best, most in-depth look at the opportunities and constraints for NFC technology in the U.S. Much of its analysis also applies in Canada. Want to keep track of this emerging technology? Click here for NFC Forum and here for NFC News sites.
First Reference Internal Controls Managing Editor
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