Swift mobile wallet adoption hinges on apps

With release of basic standards for near-field communications and more NFC-enabled handsets, onus now on developers to create attractive services to foster consumer demand, industry watchers say.
Written by Kevin Kwang, Contributor on

The release of standards to allow various near-field communication (NFC) chips to "communicate" and the buy-in of major mobile platform operators such as Google and Nokia have injected momentum to the realization of mobile wallet services, observers noted. It now remains for app developers to produce useful services that will drive consumer demand.

Koichi Tagawa, chairman of the NFC Forum, a group formed to advance the use of the technology by ensuring interoperability among devices and services, said that one of the main reasons why NFC, and in particular mobile wallets, is back in the spotlight is because the group had recently released four new specifications to aid stakeholders in advancing their services.

He pointed to the standards around ensuring peer-to-peer communication between two NFC devices and opening up the reader-writer capability for NFC chips to developers as key developments that will accelerate adoption of the technology. The two standards were released along with two others in December 2010, he said during a recent interview with ZDNet Asia.

Tagawa, who is also the general manager of global standards and industry relations department at Sony's FeliCa business division, said these new specifications give handset makers the incentive to include NFC capabilities within their devices as they embrace possible business opportunities which do not involve MNOs (mobile network operators).

"Many handsets used to be sold through MNOs and they would dictate the types of specifications to be included in these devices, but NFC is not always at the top of their priority lists," he explained. However, with the new specifications, there can be new business use cases which "reap benefits that relate directly to phonemakers", the executive explained.

Tagawa pointed to a popular food chain in Japan, which meshed both Web and mobile technologies to create a new, NFC-based business model, as an example. Elaborating, he said subscribers who sign up with the company through its Web site, would receive an e-mail detailing the top deals for the day during lunch time. Consumers can then click to order online, and head to the outlet to collect and pay by tapping their NFC-enabled phones on the in-store payment terminal.

Equipping users with NFC
Fellow industry insider, Jeff Miles, highlighted another development--the participation of Nokia and Google to enable NFC in their devices--as having a positive impact on mobile wallet developments.

The NXP Semiconductor's director of mobile transactions worldwide said Google's NFC endorsement by including tools within its Android mobile operating system's (OS) software development kit (SDK) to develop NFC tags, in particular, helps put NFC-enabled devices into the hands of more people than previously possible due to the platform's popularity.

"Google is capable of driving app development as it is the fastest-growing development platform for mobile developers. Additionally, with many handset makers using its OS, there is room for differentiation [among phonemakers and software developers]," Miles commented.

Having the buy-in of a major player such as Google, in turn, creates a "fear" among other industry players that they will miss out on a potentially lucrative business opportunity and be left behind, he noted.

When quizzed on its involvement, a Google spokesperson reiterated Mile's comments, noting that with NFC capabilities integrated into Android, developers can get started on "creating a whole new class of apps" such as those offering proximity-based information and services to users, organizations, merchants and advertisers.

"NFC is a technology with many applications, one of which can be mobile payments, but we have made no announcements about any plans to leverage NFC in that way at this time," she added.

Nokia, which had earlier announced that all its smartphones released this year will come with NFC functionality, also recognized the need for more NFC-enabled handsets in the market.

Andrew Flowers, senior communications manager at Nokia Finland, said in his e-mail that the company "applauds the recent release of competitive NFC products" as this signals to other players to start investing in NFC.

"Mobile operators, banks, retailers, developers and other stakeholders need to cooperate in creating an ecosystem and infrastructure that's available everywhere as well as put in place locally-relevant NFC services," he said.

The Finnish phonemaker had announced in April that it would be partnering with Angry Birds developer, Rovio, to develop a version of the popular mobile game which leverages on its Nokia C7's NFC capabilities. A blog post on its Web site explained that users will have to find other Nokia C7 device owners and "tap" their devices together to unlock certain levels of the game.

This version of the game will come preinstalled on the Nokia C7 as part of the Symbian Anna update. It will also be included on all of Nokia's NFC-enabled devices in 2011, the company stated.

With Google's and Nokia's participation, an analyst expressed high hopes for NFC-enabled handsets. Stela Bokun, mobile devices practice leader at Pyramid Research, said: "Mobile handsets that are NFC-capable will see skyrocketing sales in 2011 and 2012.

"These sales will be driven by the overwhelming supply of NFC-enabled smartphones that will hit the market in the next two years as well as service providers pushing their marketing strategies across the globe."

The research firm had released a study on Apr. 19 forecasting that NFC-enabled smartphones will contribute to 28 percent of total smartphone sales, or 250 million units, by 2015.

Besides Google and Nokia, Apple, Microsoft and Amazon are other notable brands that are reportedly considering jumping on the NFC bandwagon.

Bokun also suggested that for NFC device makers to boost sales, they will have to convince their users, which are mostly retailers, that the benefits from deploying NFC-based services will outweigh the cost of investment.

Create compelling services
In order to push mobile wallets into mainstream consciousness, though, NXP's Miles called on software developers to step up to the plate and provide consumers with convenient, user-friendly applications.

"We have passed the chasm in terms of having more smartphones equipped with NFC, but how fast the NFC market will take off depends on how successful services, through mobile apps, are," he said. This applies not just for big players but small, independent software developers too, the executive added.

Tagawa agreed, urging developers and consumers to start seeing the possible use cases for NFC to foster more demand. "When someone sees how an NFC-enabled app is easy to use and improves on existing processes, they will come onboard," he said.

Chiming in, Dan Novak, Qualcomm's vice president of global marketing, PR (public relations) and communications, said that while NFC technology is "extraordinary", the challenge remains to get "everything lined up" and these include developing applications that users would want to use.

With regard to mobile wallet services, Novak said such a service would come in handy. He pointed out that, with his reliance on his mobile device, he is more likely to return home to pick up his mobile phone than his wallet if he forgets to bring either item out.

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