NFC

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Near Field Communication (NFC) is a form of wireless communications technology. Similar to Bluetooth, it communicates operates by communicating with other hardware. It is typically found in smartphones and tablet computers. It is an extension to Radio Frequency Identification (RFID) technology chips and it can be broken down into three distinct categories: NFC card emulation mode, peer-to-peer mode, and reader/writer mode.[1] These different methods of operation allow NFC to be implemented in a versatile range of business applications. Among its many uses is the capacity to act as a contact-less payment method, identification badge, and most importantly it is a trigger tool that enables other technologies.

Contents

History

The NFC technology is built on top of the pre-existing RFID technology which uses radio frequency signals to send a transmission between a chip and a reader. The first patent for RFID was granted in 1983 to Charles Walton.[2] As technology advanced, the NFC Forum was established in 2004 and two years later in 2006, the Nokia 6131 was released. This was the very first mobile phone containing NFC technology.[3] The NFC Forum was at the forefront of the push for advancement in NFC technology.

NFC Forum

NFC Forum

The technology is regulated by the NFC Forum that was established in 2004 with a primary objective of promoting the use of NFC in consumer electronics, mobile devices, and PCs.[4] In addition to this, the Forum has developed a set of compliance standards for NFC enabled device manufacturers. Sponsoring members of the Forum include MasterCard, Visa, Sony, Samsung, Intel, and Google.

Technology Overview

The standards developed by the NFC Forum along with the processes used by RFID have guided the ways that NFC operates. Generally speaking, there are two main classes of NFC: devices, and tags.

Multiplication table
NFC Enabled Device NFC Tag
Communication: Active/Passive Passive
Data manipulation: Reads and Writes Data Stores Data
Operation: NFC card emulation mode
Peer-to-peer mode
Reader/writer mode
Commands other devices
Power Source Battery operated Electromagnetic field

How it Works

Similar to RFID technology, NFC tags use a process known as inductive coupling. This is a process of two pieces of hardware wirelessly sharing one battery source. In order for this two occur two elements are required; two NFC enabled devices, or an NFC enabled device and a tag. The NFC reader connected to the battery source will act as a stimulus and emit a small magnetic field when placed near a tag. This magnetic field powers the tag and generates a response by allowing a small amount of data transmission to occur between the two pieces of hardware.

Technical Specifications

As outlined by the NFC Forum, the technology has a set of basic compliance standards it must meet.

  • 4 cm proximity to initiate contact[5]
  • 13.56 MHz operating frequency1
  • Stores 96 – 4,096 bytes of memory1
  • 106, 212, 424 kbps transfer rates1

Different Modes

NFC can operate under three different modes: NFC card emulation mode, peer-to-peer mode, and reader/writer mode. Each mode serves a unique function to complete a task.

Different Modes

NFC Card Emulation

This mode allows the NFC device to act as a contactless smart card reader. Using this operating method, the device is able to facilitate payments and ticket processing.

Peer-to-Peer Mode

This mode lets two NFC enabled devices to exchange data with each other. This allows devices to pair with each other and begin transferring files or protocols to gain access to restricted Wi-Fi networks or Bluetooth pairing.

Reader/Writer Mode

Tags can be manipulated or activated using this mode. This is especially useful for programming functions and commands for an NFC tag. The business applications for this mode relate directly to marketing posters.

Comparison with Similar Technologies

Some similar technologies to NFC are Bluetooth, Wi-Fi, 3G and 4G networks, RFID, and QR Codes. Each of these technologies differ in working distance, data transfer rates, costs, and storage capacity. The table below compares the differences with each type of technology.

Comparison with Similar Technologies
Working Distance Transfer Speed Cost Capacity
NFC[6] 10cm 424 kbps Chip:$2.5-4
Tag:$0.15-0.3
Up to 32KB
Bluetooth Up to 100m 2.1 Mbps $5 NA
WiFi Up to 1km Up to 1.3 Gbps $25 NA
3G&4G Phone Network Coverage 300 Mbps High NA
RFID Up to 50m 8 kbps Device:$200-2000
Tag:$0.05-0.15
Up to 32KB
QR Code NA NA Printing Cost 3KB

Advantages

The use of NFC technology possesses several core benefits, which include a quick setup, powerless tags, low cost, and security through proximity.

  • Quick Setup

There is no setup required to pair NFC devices. To use the NFC function, users only need to put the two devices within the specified range and the connection will be setup automatically.


  • Power

No power supply is required for NFC tags. The tags will react when a NFC device approaches and produce the specified action.

  • Cost

The cost for a NFC tag ranges from 15 to 30 cents with the NFC chip costing less than $4. It is relatively cheap compared to similar technologies.

  • Security Through Proximity

It is hard to read or edit the information in a NFC tag unless users can get close enough to the tag. The working method prevents NFC devices and tags from being hacked remotely.

Issues

Despite the benefits that NFC provides, it falls short in some key areas. These include the working distance, security concerns, data transfer, and storage capacity.

  • Distance

The working distance to initiate transmission for NFC is 4 cm. Devices have to be within this range for NFC connectivity to begin; however this range is increased to approximately 10 cm during transmission.

  • Security

Although NFC is highly secured, there are still security concerns. Currently, there are two main areas of concern:

    • Eavesdropping

Although NFC works under a distance of 10 centimetres, the radio frequency signals could still be potentially pick up with antennas. This process is known as eavesdropping. Although the eavesdropping distance is affected by several parameters, it is usually within several meters.[1]

    • Unknown Information

Before actually reading the information from a NFC device or tag, a user cannot know what content is within the tag. This puts the device under risk if the information contains malicious codes.

  • Transfer Rate and Capacity

The transfer rate of NFC is relatively small, so it is not suitable for large file transfers. The technology is beneficial for setting up connections. Samsung Smartphones have a function called S-Beam, which pairs 2 devices with NFC and shares information.[2] In addition, the amount of information that can be stored on an NFC tag is limited further hindering its use.

Current Uses

NFC is currently benefitting a number of different types of industries and sectors. Transportation services, mobile payments, marketing, information sharing, and security access administration all benefit from the use of NFC’s many advantages. Its ease of use, convenience, and low cost allow for efficient implementation in each situation.

Transportation

NFC Transportation

NFC mobile payment has been applied to transportation systems in countries across Asia, such as China, Korea and Japan. Transportation systems in these highly dense countries have to meet a large volume of demand of their services. By streamlining the process, passengers will not need to wait to purchase tickets from a machine. As a result, NFC payments help the passengers to make transactions more conveniently and significantly reduce waiting time. Meanwhile, tickets stored virtually in phones are inherently more durable, less likely to be lost, and are perceived to be more environmentally friendly than paper tickets.[3]

Mobile Wallet

Mobile Wallet

A mobile wallet is a virtual wallet that can store user’s debit cards, credit cards or loyalty cards information into their cellphone and later using these electronically stored cards on NFC-enabled merchants. Google Wallet is one of the most well known mobile wallets, it is used in over 200,000 merchant locations across the U.S., and it also allows users to send their money via Gmail.[4] Another popular Mobile Wallet is ISIS, which is developed by AT&T, Verizon and T-Mobile. Both Google Wallet and ISIS are only available in the U.S. at this time. [5] The current issue of the mobile wallet is its adoption in the general population. MasterCard conducted a survey regarding this issue; according to the survey, 63% of survey takes aged from 18 to 34 said they would be “comfortable using mobile phones to make purchases”. However, only 34% of the people who were above age 35 said they would use cell phones to make purchases. The future of mobile wallet is still vague. In addition to the mobile wallet, credit card companies have begun implementing the use of contactless payment cards. These payment methods have chips embedded in the cards that give users the ability to make purchases without the need to swipe their credit cards.

Credit Cards

Since NFC is a very secure way of making transactions, many finance companies, such as MasterCard and Visa, using this technology to make contactless credit card payments. Users can simply tap their credit cards on a terminal to complete any transactions that are under $20.[6] (The limit on the purchase allows for a safeguard in place to prevent users from inadvertently making a purchase that they are not fully aware of. The contactless payment cards open doors for users without smartphone devices to benefit from NFC embedded technology. Subsequently, this is further promoting the advancement and use of NFC.

Set-up and Data Transfer

NFC Tags are programmable tags that can be run without battery. Users can put a piece of information, such as a phone number or a URL into the tag. When an individual uses their NFC enabled device to tap on a tag, it then sends instructions for the users device to perform a function. This convenient feature transcends industries and is closely linked to the core benefits of the NFC technology. NFC is a powerful tool to transfer data between different NFC enabled devices. Without using cables, NFC enabled devices such as cellphones or tablets are able to exchange photos, contacts, links or other electronic data simply by tapping each other.[7] The NFC device can interact with a tag or another device and receive a snippet of information that redirects a user to a point of access to download data. Tags are enablers for businesses to easily grant a large group of users with NFC enabled devices permissions to access a network, obtain information, or transfer data.

Marketing

NFC tags may be of particular interest to marketing professionals, as they can be embedded in posters, products, maps, etc., these inexpensive tags can be integrated into the posters and thus provide customers relevant information by tapping their phones on the posters. Some grocery stores in Europe use NFC tags to provide customers information about products. In other words, NFC has the same applications as barcodes or QR codes. However, compared to barcodes and QR codes, NFC tags do not require customers to use cameras or check lighting conditions.[8] This provides the marketing industry a tremendous advantage of granting quick access to information as users pass by an advertisement.

Key Cards

NFC Key

In some places in Europe, NFC has been used as a replacement of traditional key cards, users can get access to a building or room by using their encrypted access information stored in their NFC enabled phones or devices. For example, NFC makes it possible for hotel guests to check-in and out using their mobile phones. The Clarion Hotel in Stockholm piloted NFC hotel keys program that allows their customers to check-in and out by using their cellphones.[9]

Future Business Applications

In 2013, there have been a reported 285 million NFC-enabled handsets that have been shipped and sold worldwide. Forecasting indicates that the number will be doubled in the next year. By 2015, one in every two mobile phones will be NFC enabled.[10] As more and more mobile devices will be equipped with NFC technology, many organizations have begun to assess the business opportunities of implementing NFC in their operations.

Health Care

Since wireless health monitoring devices are being increasingly advocated by health professionals, these devices can be supported by using NFC tags. During a patient’s hospitalization, NFC tags and handsets can help health care providers by keeping track of patient’s medications and logistical information related to patient check-in.[11] Recently, Harvard Medical School has developed a trial NFC system to keep track of each patient’s medication with NFC enabled tablets and tags. Prior to the implementation of NFC, nurses had to access a large workstation to view patient information and analytics. However, after the implementation, nurses only needed to carry a tablet and no longer to worry about the difficulty of scanning barcodes on the patients identification tag. Despite being a relatively simple trial, this use case has proven to be effective at improving efficiency at the hospital and it provides promising benefits that may improve the adoption rate of the technology.[12]

Social Media

NFC tags can be programmed to upload some information to a social media website and thus saves people time to do it on their own. Therefore, it is possible that social media will be integrated with NFC in the future. There are two possible applications: NFC integrated social media apps and locations that can connect to social media with NFC tags.

NFC Integrated Social Media

A German university Technische Universität München developed a prototype of a NFC integrated Facebook app, the app enables users to exchange their profile and add Facebook friends when they tap their NFC cellphones together. This application can save users a lot of time when one person tried to add another on Facebook but have trouble finding the right one because there are too many people who have the same name.

NFC Enabled Locations

This medium allows users to connect and share information at a location that has NFC tags embedded in the area. For example, Wallibi theme park, located in Belgium, has NFC walls at some of its most famous attractions. When an individual connects with the NFC wall with his NFC device, it will automatically upload a message to his Facebook wall.[13]

Gaming

Skylanders: Spyro’s Adventure is the first video game that requires players to purchase real-world figures in order to use them in the game. The figures have NFC chips in them so when a player taps it on his gaming platform using NFC, the data of the figure will be transferred to the console. Over 30 million figures have been sold in the last year. Since Skylanders: Spyro’s Adventure is such a success; it is possible more games like it will be released in the future.[14] NFC can also serve as Real World Easter eggs as well. Players can explore the real world and unlock awards in the game. For example, the popular mobile game Angry Birds have hidden levels for Android users. When two people tap their phones together with NFC, both of them will get a new level.

Data Mining

NFC Data mining is another future application. For example, marketers can get information of how many people have responded to their NFC posters. Transportation operators can use information provided by NFC by tapping to identify the busiest routes and then utilize their current resources to improve the transit system. Credit card companies can use NFC payment information to find the places that people are most likely to make NFC payments.

Adoption from Business Perspective

Competition in Mobile Commerce

A major risk for businesses looking to adopt the major infrastructure is the potential for another technology or methodology to supplant NFC before widespread commercial adoption. Applications such as Groupon have already adopted the bar code / QR code as a means to redeem purchases. Another example would be the rise of the Starbucks application, where purchases can be made quicker by scanning a code that connects to your account through the application. Not only are there multiple competitors using the NFC platform as the differentiator for the mobile wallet (including Google Wallet, Paypal, and Isis) but also homegrown solutions by individual retailers. This may segment the market of digital wallets rather than the necessary amalgamation necessary for widespread adoption.

Infrastructure

There were 125 million NFC enabled devices shipped in 2012 with a forecasted 320 million units across all product categories in 2013.[15] However, the technology is not yet in all smartphones to gain widespread adoption. The notable omission would be in Apple’s flagship iPhone, which currently holds 19% of the market share.[16] However there are substantial rumours of NFC integration in the next generation of iPhones to help Apple power the next reiteration of the Apple Passbook.

Cost

The cost of deploying the necessary hardware for NFC transactions in retailers can range anywhere between $15-$50 per checkout lane.[17] Large retailers may have stores with up to 40 checkout lanes and have thousands of stores nationwide to implement. Additional costs include testing, manpower and training costs.

Adoption from Customer Perspective

Social Implications

The underlying deterrent for widespread adoption of the usage of mobile payments can be attributed to the social factors that arise with the new technology. As of the moment there is not a large enough use case and value proposition that would entice the average consumer to transition to the new payment method. With a mobile wallet, customers can consolidate reward, loyalty and credit cards into a central location. However, it is very unlikely that a mobile wallet will be able to replace a real wallet. Cash can never be replaced and credit cards are a fairly convenient form of payment. For the mobile wallet to work there is a battery limitation that needs to be considered. This may further complicate the social issues.

Security

NFC technologies have a very secure connection due to the proximity of the connection. However there are a few security issues that may hinder adoption. Consumers may be less inclined to store sensitive information on their mobile devices, especially with the breaches in security in companies such as Sony and LinkedIn in recent years. At this stage consumers may not be comfortable with their smartphones being a wallet, a key, transportation device all while maintaining functions of a phone. The downside of the reliance of the device currently outweighs the convenience.

Education

For NFC technology to succeed there has to be sufficient education regarding the benefits associated with the usage of the technology. NFC has the potential to be a disruptive technology, especially in the realm of mobile commerce and as a trigger-device for other connections. Every new phone now has NFC technologies built in and companies are finding innovative ways to use the technology. However, without proper education, especially with the aging generation, NFC also poses the risks of slipping through the cracks.


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