NFC? NFW! (Near Field Communications is Total Hype) [Updated]

The buzz about near field communications (NFC) is totally missing the point.  NFC is just a contactless (or nearly contactless) replacement for swiping a credit card. But who cares?  The swipe really doesn’t need replacing.  It is no more trouble to swipe a credit card than it is to tap a smartphone on a pad.  20 credit cards stacked up in your pocket is still a tenth the size and weight of your smartphone.  Saving that weight or hassle when you are headed to the gym is hardly a compelling vision.  It is just not valuable to consumers or merchants, especially when you consider the hassles one has to go to in order to manage the security risks.

The excitement is misplaced.  The things to get excited about are systems which handle the payment for you by tapping into the smarts of a mobile device and your identity and your context to create a relationship between you and the vendor, to the potential benefit of both.  Currently an NFC tap is every bit as anonymous and devoid of context as the tried & true credit card swipe.  What you want is a system that knows it is you and allows the merchant to relate to you in the form of loyalty awards, discounts and relevant offers.

In other words, you want to be INSIDE the transaction, not merely a facilitator of it.  Currently, NFC is just a minor twist on the status quo.  I reserve my excitement for next generation solutions.  Systems like the nascent FigCard technology (recently acquired by eBay/PayPal) or Square or online group buying systems, or the many emerging App-based check-out tools such as AisleBuyer are much more to the point and have much more potential than just basic NFC.  Now, NFC that is integrated with the smarts of the phone and the apps the way GPS is might be a different story, but that is not in the cards at the moment, so this is nothing more than a yawn.   For more, check out the recent GigaOhm interview with Keith Rabois of Square:

The COO of mobile payment startup Square, Keith Rabois, thinks that the mobile payment technology Near Field Communications (NFC) has no value proposition for consumers and merchants… “I’ve never met a single merchant in the U.S. who says I want this NFC thing,” said Rabois in an interview with GigaOM founder Om Malik.  … Despite the growing ecosystem around NFC, Rabois questions how useful the tech will be to consumers and businesses, and said while NFC makes good PR and cocktail party chatter, it doesn’t offer a value proposition. Even Google’s work with Google Wallet is meant to help Google track behavior, and enhance their business, not to enable small businesses, said Rabois. In contrast, said Rabois, we’re trying to help small business retain each customer, and have the same level of analytics as larger businesses but at a low cost. It’s hard for small businesses to compete at this level with the large companies, said Rabois. Square focuses its network on small business transactions, like a local merchant selling wares at a farmers market.

Update: For an interesting take on how the failure of NFC reflects everything that is wrong with Nokia, check out this excellent story by Bobbie Johnson of Giga OM: Everything that is wrong with Nokia in one Blog Post.

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