Several mobile wallets rely on Near Field Communication technology to make contactless payments at the point of sale, and while the availability of NFC in phones is growing, the tech might need a bigger push to reach ubiquity.
Chip maker Broadcom Corp. announced last week it would share its NFC controller software stack with competitors to help advance NFC adoption. By making the software available to the Android Open Source Project and to the latest version of Google's Android mobile operating system (version 4.2 or "Jelly Bean"), Broadcom is making it possible for device makers to use its software even if they don't use Broadcom chips.
"We've established a base where the ecosystem can grow," says Mohamed Awad, associate line director for NFC at Broadcom and treasurer of NFC advocate group NFC Forum. "It's about having a modest slice of a very large pie as opposed to trying to take a very large piece of a very small pie."
If the move advances NFC adoption, it is a fair trade-off, Awad says. The sharing is designed to remove the ties that bind software and silicon chip makers, limiting original equipment manufacturers (OEM) when they want to create new devices using NFC.
"Our goal was a need to create a basis whereby OEMs can go off and select a silicon vendor that suits their needs irrespective of proprietary tie-ins," Awad says.
Besides phones, NFC is used in tablets, televisions and gaming systems. Broadcom's software is used in the new Nexus 4 smartphone and Nintendo's new Wii U home video game console, Awad says.
The flashy aspect of NFC in phones is the tap-to-share and tap-to-pay features. But those features need compatible devices to share and pay, and for now, the fun side of NFC will likely be used far more than the business side, Awad says.
"When folks open it up Christmas morning they're not going to run out and pay for something, they're going to use the NFC to interact with the device in a new and novel way," he says.
That's OK, says Awad, as any use of NFC is seen as a training ground for its payment possibilities. Despite all the excitement around NFC-as-a-toy, that's not what's driving innovation and installation, he says.
"The thing that's driving OEMs or the thing that's driving carriers to subsidize NFC into phones is payments," Awad says. "One of the challenges mobile payments with NFC faces is getting that infrastructure rolled out."
There needs to be more point of sale hardware compatible with NFC-enabled smartphones for transactions to take off.
As a measure of NFC adoption, it is discouraging to see companies like PayPal and Google offer plastic cards to use as complements to their digital wallets, Aite Group senior analyst Rick Oglesby says. PayPal has offered a plastic card since the launch of its digital wallet, whereas Google is rumored to be adding one shortly.
"We're seeing highly innovative technology-driven companies use 40-year-old plastic technology," says Oglesby. "Payment by phone isn't really catching on at this point in time. Not to say that it won't, and not to say there's no value in it, but we're certainly seeing companies that are very intent on moving to mobile put in stopgap solutions with cards. There's not a lot of data that says consumers are ever going to use NFC."
Oglesby estimates that by 2015 as many as 55% of point of sale terminals shipped will be able to handle NFC payments. The list of NFC-enabled smartphones is growing as well.
Part of the current disconnect is that people change their phones much more often than merchants change their terminals, says Oglesby.
"That being said, the terminal deployments are certainly ramping up," he says. "There's a lot of NFC devices that are being shipped to the merchants where the merchants aren't activating the NFC capabilities or don't even know that they're there."
In some cases, the merchants "know it's there but it may not even be turned on," he adds.