EComm Assignment
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NFC will be a new age of payment or a failure
IntroductionSince 2006, more and more phone implant with NFC technology, the latest Samsung Galaxy SIII
and upcoming iPhone5 both include NFC as a standard. Will this technology become a standard like
Wi-Fi and Bluetooth?
One of the applications for NFC technology is use for NFC contactless payment, such as VISA
PayWave and Master PayPass. This report aims to analysis the possibility for NFC contactless
payments become a common payment method, or a failure like Mondex.
What is NFC?
Near Field Communication (NFC) is a standard-based (ECMA-340, ISO/IEC 18092) contactless
short-range communication technology defined by NFC forum, which was founded in 2004 by Nokia,
Philips and Sony, and now members joined into the forum.
How NFC Works?
NFC technology is based on the Radio Frequency Identification (RFID) technology that uses the
magnetic field induction to let two NFC devices to communication in a near distance up to 10cm. It
operates at the frequency of 13.56 MHz, and the data transfer rate at 106, 212, or 424 kb/s.
Methodology
The research for this report was conducted in two methods. A survey with 10 questions was
created in Google docs and make available to my friends on Facebook. The survey questions as
shown in Appendix I and survey result as shown in Appendix II.
An online research was conducted, articles related to this topic which published for last 12
months were reviewed.
Brief History of NFC Contactless
In 2004, Nokia, Philips and Sony work together and formed an NFC forum aim to develop a new
standards cover communications protocols and data exchange formats based on the existing
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radio-frequency identification (RFID) standards including ISO/IEC 14443 and FeliCa. The new
standard is called Near Field Communication (NFC) include ISO/IEC 18092. The forum also
responsible for promoting NFC and certify NFC compliance devices.
At the earlier stage, NFC was used for reading smart tag or smart poster, exchange information
between two devices such as exchanging contacts, photos, videos or files.
Payments
Further applying of the technology, NFC devices is beginning to use for contactless payment
systems; it is similar to existing credit card and electronic ticket smartcard systems. It is possible to
replace or supplement existing systems and allow going for mobile payment. For example, Google
Wallet allows credit card and store loyalty card information to be stored in a virtual wallet, and thenuse an NFC-enabled device to pay at terminals same as using MasterCard PayPass. NFC ticketing
systems for public transport had been trialed in Germany, Austria, Latvia and Italy.
Other applications, British Post Office announced in June 2012 that NFC-compatible payment
systems will launch to each of its branches.
Analysis of Collected Data
There are 40 completed questionnaires were received, Data were analysis and interpret intouseful information as shown in Appendix II.
Percentage of people who has mobile payment experience is 90% which is high. It is as a result
the growth of Smartphone adoption increases; this is lending more application to Smartphone as a
mobile payment platform.
Although the percentage of people who has NFC contactless mobile payment experience is low,
the overall experience on mobile payments is high. It is due to the NFC contactless mobile payment
was just begun to launch in Hong Kong and not much NFC ready phone model available. The
concept of mobile payment is accepted by user, just the question of how to make user to accept a
different method.
NFC ready phone market will be focus on people at the age range within 21 to 39 years old
with medium to high education. Their income range within HKD10,001 to 30,000. The price range of
NFC ready phone is between HKD2,500 to 5,000; it is related the affordable level in according to
users’ income.
Major concern on using NFC mobile payment is security; it can be resolve when user get more
understanding about the technology.
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Market adoption of NFC-Contactless
NFC technology is available for 20 years, but it is not widely adopted by the market. This isrelated to the decision of leading device manufacturers to support this technology, payment
processors.
There are some factors related the market adoption of NFC technology. NFC technology become a
standard component on Smartphones like Bluetooth, it will line up to Smartphone market
penetration ratios. NFC payment will be broadly adopted within the next three years, such as British
post Office announced to roll out NFC-compatible payment systems to each of its branches across
the country with effective from late June 2012. ASAP Transaction Processing Corp Limited (ASAP TP),
a transaction processing technology provider, had announced that will work closely with
MasterCard to roll-out nova.m using PayPass contactless technology in Hong Kong.
Payment
Visa noticed that the increase in popularity of NFC mobile payments and expected Near field
communications (NFC) mobile payments will exceed US$180 billion globally in 2017. Payment
networks, banks, merchants, mobile device manufacturers and mobile network operators are look
forward to Smartphone shipments to grow by over 38.6 percent year-on-year in 2012.
In order to make consumers and merchants to accept a new mode of payment method, one of
the successful factors to be concern about is what benefits to them.
Benefits for Consumers
NFC ready phone allows plurality of function in one device, and fully utilize value-added
services. It provides convenience to consumers at Point-of-Sale, no longer need to take out credit
card from wallet and able to select different credit card at the finger tip. No need to carry cash,coins, and credit cards. More secure than WAP base payment, as it require close distance
communication between two devices, able avoid hacking in the air.
Benefits for Merchants
It provides new options for Point-of-Sale marketing, and reduces cash handling and operation
costs. Time for transaction is just the time of tap, it reduce the transaction time.
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Conclusion
It shows that consumers are ready to pay with their NFC ready mobile. Assume that it issuccessfully launched worldwide and the service meets the consumers’ expectation. More
manufacturers’ supports and adopted NFC as a standard on their products; currently NFC forum has
more than 160 members. Soon NFC will be available on all Smartphone including premium and non
premium models.
On the other hand, more merchants and service providers recognize the potential of this
technology such as British Post Office VISA, Master, Discover, and American Express. The potential
market size is big, such as China, India, and Africa.
NFC contactless mobile payments will be succeeded; it is now penetrating the market at the
right moment.
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Appendix I
Survey Questions
1. Which category below includes your age?
a. 17 or younger
b. 18-20
c. 21-29
d. 30-39
e. 40-49
f. 50-59
g. 60 or above2. Are you male or female?
a. Male
b. Female
3. Do you experiencing any form of mobile payment method?
a. Premium SMS based transactional payments
b. Direct Mobile Billing
c. Mobile web payments (WAP)
d.
Contactless NFCe. All of above
4. Do you current own an NFC ready mobile?
a. Yes
b. No
5. How likely are you to purchase an NFC ready mobile in next 12 months?
a. Extremely likely
b. Likely
c. Not Sure
d. Unlikely
e. Extremely likely
6. If you own an NFC ready mobile, will you use it to make payment?
a. Yes
b. No
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Survey Questions cont.
7. What is the amount that you will use NFC payment to pay for?
a. Less than HKD50 (~Less than GBP4.2)
b. HKD51-HKD100 (~GBP4.3-GBP8.3)
c. HKD101-HKD200 (~GBP8.4-GBP16.7)
d. HKD201-HKD500 (~GBP16.8-GBP41.7)
e. HKD501 or above (~GBP41.8 or above)
8. What is your major concern when using NFC payment?
a. Accept by most retails
b. Easy to use
c. Security
d. Transaction accuracy9. What is your highest education level?
a. Below high school
b. High school
c. Associate Degree
d. Undergraduate Degree
e. Master Degree
10. What is your income range?
a.
Less than HKD10,000 (~Less than GBP833.3)b. HKD10,001-HKD20,000 (~GBP833.4-GBP1,666.7)
c. HKD20,001-HKD30,000 (~GBP1,666.8-GBP2,500)
d. HKD30,001 or above (~GBP2,500.1 or above)
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Appendix II
Survey Result
90%
10%
People who has mobile payment experience
Experienced No Experience
23%
18%54%
5%
People who has experience on
different type of moble payment
SMS Payment
Direct Mobile Billing
WAP Payment
NFC Contactless
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Appendix II Survey Result
13%
88%
People already own an NFC ready phone
Already Not Yet
94%
6%
People who will purchase an NFC
ready phone in the next 12 months
Will Will Not
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Appendix II Survey Result
94%
6%
People who will purchase an NFC
ready phone in the next 12 months
Will Will Not
52%48%
Gender of people who will purchase an
NFC ready phone in the next 12 months
Male Female
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Appendix II Survey Result
3%
12%
43%
30%
9%
3% 0%
Age group of people who will purchase an
NFC ready phone in the next 12 months
17 or younger
18-20
21-29
30-39
40-49
50-59
60 or above
3%
36%
6%
46%
9%
Education level of people who will purchase
an NFC ready phone in the next 12 months
Below High School
High School
Associate Degree
Undergraduate Degree
Master Degree
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Appendix II Survey Result
3%
24%
55%
18%
Income range of people who will purchase an
NFC ready phone in the next 12 months
< HKD10,000
HKD10,001-20,000
HKD20,001-30,000
>HKD30,001
89%
11%
People own an NFC ready phone
and will use mobile payment
Will Will Not
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Appendix II Survey Result
3%
12%
18%
38%
29%
Acceptable payment range when
using NFC mobile payments
<HKD50
HKD51-100
HKD101-200
HKD201-500
>HKD501
18%
29%53%
Major concern when using NFC
mobile payments
Accept by Most Retails
Easy to Use
Security