Nalini Muppala

Analysis, observations, perspectives on mobile space

Near Field Communication: Barriers To Adoption (Part 5)

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Diverse Ecosystem

One of the barriers for successful adoption of NFC in phones has been the push and pull among ecosystem partners about the business models and direction. The vested interests of various players and their attempts to control where this plays out carry the risk of fragmentation of the ecosystem.

Costs

Although the cost of adding NFC to a phone has come down to about $5 from about $20–$25 in 2008. It is still not cheap. In contrast, to cite an example of the most popular smartphone around, according to iSuppli, the BT/WLAN combination chip (Broadcom’s BCM4329) in the iPhone 4 costs $7.80, and the GPS chip (Broadcom’s BCM4750) costs $1.75. So, the decision to add NFC will not be made lightly.

For the short term, payment and ticketing are the cash cows for businesses deploying NFC. According to ABI Research, retailers spent $14.8 billion on IT in 2009. Part of this went to point-of-sale (POS) terminals (hardware and software). The approximately 8-year life cycle of newly deployed terminals means adding NFC support during periodic upgrades is not an option. A bridge gap option is to have add-on units, and equipment vendors are hard at work on this. Still, merchants do not see a clear benefit to such investment, especially given the lukewarm reception to contactless payments.

Security Concerns

The very nature of NFC being contactless creates potential for abuse. NFC transactions create a radio frequency (RF) field over which power and data are transferred. This allows for eavesdropping.

Users need to be assured that a lost or stolen phone could be handled the same way a lost or stolen card would be, including liability and fraud protection similar to that for physical cards.

In addition, mobile phones these days – at least smartphones – come with a remote erase option. This service has so far been more prevalent among business users. If the phone carries payment and banking information, consumers are more likely to opt for such additional services.

Phones could provide an option for the user to configure NFC functionality to require a PIN or password to start a payment transaction and thus reduce misuse of lost or stolen phones. It could be argued that requiring such authentication beats the purpose of an elegant and seamless transaction.

Biometrics

To strengthen security and prevent a lost phone from being misused, fingerprinting technology could be used to authenticate the user. Using NFC features will involve bringing a certain side of the phone in proximity to the target – either a passive tag or an active reader –and the top rear side of a phone will be a good place to put the NFC antenna. It would not be asking much to require the user to hold the phone such that the thumb covers part of the screen (let us stick with touch screen devices for now) and other fingers mostly on the rear and sides. Who would not like the added security?

Apple, during the recent controversy over antenna placement that caused dropped calls, slipped a suggestion on how to hold the iPhone 4 to prevent such issues. Competitors had a field day pointing out that their phones did not have any such issues and that the users could hold their phones any way they preferred. If the above scenario were to be realized, phone manufacturers would be creating instructional material suggesting to users how to hold their phones!

The idea of using biometrics for authentication in mobile devices is not new. Companies such as Atmel, Authentec, and ST/Upek already promote the idea of authentication on devices using fingerprint detection. Fujitsu is the pioneer of adding fingerprint detection to a cellphone. The Fujitsu F505i cellphone, released in February 2003, uses an Authentec sensor.

Little Motivation

Thus far, payment and ticketing have been the major applications for contactless. These needs are well served with cards and NFC in phones will not make a big difference to these. Merchants are well served with current payment processing options.

But merchant unions are unhappy about interchange fees. They have a valid point that absence of real competition in this area has kept the cost high. However, as seen from their collaboration with major banks for NFC trials, interchange companies could join forces with banks and share their revenue with them and not pass on any savings to merchants.

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Written by Nalini Kumar Muppala

October 13, 2010 at 4:00 am

Posted in NFC

Tagged with , ,

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