Near field technology and mobile payments

Near Field Communications (NFC) technology is becoming a common feature on smartphones. It has a wide range of applications. Locally, Google has deployed the technology in the Beba cards used by some commuters on Nairobi buses.

In the mobile world, the technology turns smartphones into gadgets that initiate payments and other financial transactions by simply waving the phone in front of a detector.

From the technological front, the current mobile technologies on the Kenyan market utilise the USSD (unstructured supplementary service data), which is readily available on the software platforms of all GSM phones. These types of mobile payments use SIM cards. The NFC technology, on the other hand, is not SIM card-dependant. The gadgets or smartphones are usually shipped with an NFC chip embedded in their hardware.

The technology is readily available for use irrespective of changes in the subscriber’s mobile operator or SIM card. This implies that the platform puts banks, merchants, handset owners, and mobile operators into a common ecosystem.

Nowadays, the impetus behind NFC is evident among device manufacturers and ICT industry players. Samsung Electronics, Apple, LG, and Nokia are integrating NFC in their smart devices and phones. The open standard of Android by Google is set to push the technology in the market through adoption of various designs on mobile hardware with suitable interoperability, standardisation levels, and consumer tastes.

In the Western countries, the mobile e-wallet is vested in NFC technology. Google runs its own version of NFC payments code-named “Cream”, which is available on high-end Android-based smartphones.

Opportunities

NFC is one technology with real benefits as well as challenges. The opportunities for NFC include m-commerce, electronic funds transfer, and electronic ticketing, as is seen in Citi Hoppa’s Beba card. The technology is also useful in non-payment-related uses in industries.

In the smartphone mode of payment, the phone is equipped with an NFC chip and radio-wave transmitter in its hardware. When activated by a software application, the device transmits information via radio waves, which are received by sensors on an NFC reader module. The phone becomes a contactless “credit card” able to initiate payment for a transaction. Depending on the end user needs, a number of mobile money transactions can be initiated with a simple waving of the phone in front of the NFC receiver module or reader.

The advantages of NFC are clear. In terms of security, it deploys better measures compared to the credit card. Credit cards can be stolen, cloned, and swiped at card readers by any imposter. The NFC has unique end-user encryption protocols and authentication levels that appear superior compared to credit cards. Moreover, for a stolen phone, the NFC chip is automatically disabled remotely by the merchant or service provider once an alert is raised by the subscriber.

Although NFC involves waving the phone in front of a reader, the chances of criminals capitalising on-air-transmission snooping are slim. The phone is placed at a distance of less than four centimetres from the reader in order for the sensor to work, hence, making any interceptions of the monetary data impossible from nearby spy devices.

Challenges

The NFC technology in mobile payments is just an alternative to SIM card-based payments. NFC is highly dependent on big industry players, merchants, and operators working together. As a matter of fact, the NFC technology at retail level requires supermarkets and payment points to adopt NFC sensors or readers and that boils down to additional costs. Besides, the mobile subscribers can only access the services using an NFC-enabled smartphone.

So, does NFC stand a chance in an emerging market like Kenya? The trend might be gaining momentum in the West, but mobile operators will stick to their innovations. In fact, NFC reflects how the West is playing catch-up on the mobile payment scene.

The writer is an ICT analyst and a telecommunication engineer.