field communications (NFC) is the kind of wondrous future-tech that promises to
bring new convenience to every-day chores like shopping for groceries or
fueling up at the pump. Japanese customers have already been using
NFC-enabled cell phones as credit cards for several years.
Now Google, Inc. (GOOG),
makers of the world's top smartphone operating system, Android, have announced
than NFC will soon arrive for American consumers.
The announcement was made at the Web 2.0 Summit by Google CEO Eric Schmidt, who
down as Google's CEO next Monday. Web 2.0 is an annual
internet-aimed conference held annually in San Francisco, Calif. since 2004.
The company had previously
expressed interested in NFC payments, but had failed to fully
elaborate on how it would execute the billing scheme.
I. Credit Cards on Your Phone
Initially Google has selected two corporate partners in the credit and banking
industry -- MasterCard, Inc. (MA)
and CitiGroup, Inc. (C).
CitiGroup claims to be the largest issuer of credit cards in the world with its
Citi Cards. Much of the company's business is outside the U.S.
MasterCard is second
to Visa (V) in
the U.S., with 171 million credit cards and 123 million debit cards active
within the U.S. [source].
As with standard cards, a fee will be charged to businesses. It's unclear
at this point whether the cardholders (customers) themselves will pay any
additional periodical or spot fees for the service.
What Google did make clear is that it is not getting a cut of any fees from the
It is offering the service for two reasons.
The first is that it makes an attractive selling point for its smartphones.
Top competitors Apple (AAPL)
and Research in Motion (RIM)
lack billing service on their popular U.S. models.
Secondly, Google will track your purchases and says it may use them to try to
better target ads or discount offers at your phone.
As traditional advertising begins to fade, targeted advertising is a booming
business. By direct ads that customers might actually care about, for
example local sales or sales on items the user typically purchase, the uptake
rates are far higher. Everyone from U.S grocery chains like Kroger, to
internet giants like Google, eBay/PayPal, and Facebook are deeply involved in
The dark side of data mining is that more of your information will be stored
with the potential for compromise. While Google and others have engaged
in efforts to anonymize data to a degree, advocacy groups and U.S. government
officials have expressed concern about data mining and suggested possible legislation to limit its scope.
For now customers choosing to adopt the new Android service, will find
themselves jumping deeper into Google's data mining bid.
II. Android Arrival is Imminent
The new service is supported by operating system APIs in Android 2.3 "Gingerbread".
Gingerbread is Android's latest operating system version, which features user interface
refinements, battery life improvements, increased web standards support, and
improvements to the OS's copy, cut, and paste routines.
The Software Development Kit for Gingerbread rolled out to developers in
December. Motorola and Samsung appear to have advanced builds of
Gingerbread ready for their smart phones whenever carriers decide to throw the
switch. Builds for Motorola's Droid X and Droid 2 and Samsung's Galaxy S
smart phones have leaked in recent weeks.
Currently Gingerbread is exclusively available through official channels on Google's Nexus S,
which went on sale in December of last year.
NFC requires special hardware, so it's unlikely that phones like the Galaxy S
would be able to support the new technology. For now the Nexus S appears
to be consumer's best bet for getting access in the near future.
III. What is NFC and Where Can You Use It?
Near Field Communication relies on an active device (like a key fob or your
phone) acting as an active (powered) sender and sending a signal to a passive
receiver. Typically the receiver is located within 4 cm of the sender in
order to properly receive the signal.
The technology operates at the 13.56 MHz frequency, well below the frequency
band commonly used with Wi-Fi, 2.4 GHz.
The technology was developed and licensed by Dolby Labs' subsidiary Via
Currently one of the largest makers of NFC readers is Verifone Systems, Inc. (PAY).
There are actually thousands of such devices already employed across America.
Examples include checkout devices that you tap your card against and gas
pump charge devices you tap a key fob against. With the new deal, you
could theoretically use your compatible Android smart phone with most of these
devices.You may need to have your license ready to present for larger purchases, as with credit cards, to confirm your identity.
A recent Federal Reserve sponsored study [PDF] stated that there were 150,000
NFC readers installed at locations across America. And the study claimed
Americans own 70 million NFC enabled devices -- largely credit cards.
A MasterCard sponsored survey by Edgar, Dunn & Co. suggests mobile
payments, the field that NFC billing falls under, will swell to a $618B USD
market by 2016.
It's unclear how the device will coexist with the upcoming Isis billing system from Verizon
T-Mobile (Deutsche Telecom: DTE),
and other players. It appears, at present, that it will compete with such
While wireless billing will almost certainly land on the iPhone, on
Blackberries, and on the Windows Phone 7 platform in the near future, it
appears that Google will be the first smart phone OS maker to leverage this
fascinating, if a bit scary technology.
The technology is thought to be relatively secure; it would likely take more
effort to steal your card digital via NFC trickery than it would to steal your
card information from a corporate database.
quote: But if they use a fake ID, and forge the signature in the same way on the fake ID and the credit card slip, it won't matter.
quote: Heck, in the case of Check ID you're potentially making the criminal work a little harder to produce/buy fake ID
quote: Further, you argue that it somehow makes it harder to dispute the charges. Care to back that claim up with some proof? The only thing the merchant has verified is that the supposed cardholder has an ID that appears to match the name on the card. That doesn't prove anything,
quote: If you want merchants to ask for your ID, sign your card and write “Ask for ID” below your signature (however, merchants are not bound to honor that instruction). If you do not want to show ID, simply sign your card and refuse to provide ID if asked.