Implementing NFC Technologies in Banking

Near field communication (NFC) is a series of protocols that would facilitate electronic devices to have radio communication among themselves, either by interfacing the devices or by getting them closer to each other (less than or equal to 10 cm).

The launch of Apple Pay (a mobile payment and digital wallet service) by Apple Inc has given a big boost to the NFC mobile payments.

According to Hans Reisgies, co-founder and Senior Vice-President of customer solutions center at Sequent, "Apple Pay will be remembered for moving everything forward. It is the big stone that will cause the ripples in the water. The effect of it is enormous. I think we will have 2,000 banks signed up for it by the end of the year. That's a lot of slow-moving companies, moving very quickly".

According to experts, the total mobile and NFC transactions are increasing expeditiously across the globe. The use of NFC technology is expected to grow considerably as the consumer awareness increases.

In the recent past, retail outlets would not invest in NFC infrastructure because of a lack of demand. Again, mobile device manufacturers were not incorporating NFC into mobiles since outlets were not utilizing them.

However, the scenario has changed at present. Hence, modified payment solutions would be presented to the consumers every month as NFC.

Several NFC competent phones are available in the market at present, with many more models expected to be launched in the future, which is good for the contactless sector.

Since the support of NFC on mobile has become the standard, only one infrastructure issue - (POS) needs to be resolved to facilitate the growth of NFC. The long-term perspective looks encouraging.

Several nations such as the UK, Canada, Australia and Spain have excellent rates of contactless financial transactions while nations such as the US are working on bolstering the contactless payment.

Infrastructure is not the only stumbling block, a mindset for change is also vital, ensuring users are comfortable in using the mobile phones for making payments. It is vital for the long-term success of NFC.

Consumers have started getting used to contactless, but migrating them from contactless cards to mobiles is another issue that needs to be resolved. As consumers become more receptive to the concept, it is expected to become more acceptable.

Service providers are also interested in ensuring the smooth transition from plastic to mobile for the following reasons:

• Consumers managing transactions through their mobiles will deliver various types of information.
• Construct efficient consumer profiles.

Delivering Customized Service

However, for consumers to support the services, the service providers must be able to address their security concerns. Consumers must be given the confidence that the technology is not only user- friendly but also their credit card & banking information available on the mobile is secure.

Mobile phones are prone to security breach since they are an extremely connected instrument, but they provide several features - geolocation, device fingerprinting, tamper-proof hardware materials that reflect a robust tool set with a capacity to deliver more security layers than EMV.

There are some critical issues that need to be addressed:

Complexity of the Market

The number of players providing NFC payments is huge. This results in a complex ecosystem. The various stakeholders concerned with NFC technology must identify the most optimal route to market.

Customer Coverage

If the solution has to be feasible from a business perspective and result in more customer uptake and transaction volumes, banks must select a route to market that delivers a substantial level of customer coverage.

Customer Requirement

The capability of NFC payments is not a stand-alone solution to customer issues. At present, customers have several methods to make payments for products. Customers would migrate to NFC payments only if there is an additional value for them.

The provision of discounts and other offers for customers using NFC would be one way of providing value, bolstering revenue generation.

The Efficiency of Mobile Network Operators

The role played by Mobile Network Operators (MNOs) within the value chain also provide a challenge to banks seeking to innovate with regard to the NFC technology.

Banks must communicate with the MNOs to finalize commercial conditions along with the contractual details. It is particularly vital when it comes to interpreting the customer servicing structure, controlling the customer data, and managing the marketing & advertising offers.

Any innovation related to payment is not a straight line, and there are advanced technologies and use-cases that are being developed concurrently. This provides an excellent opportunity for the corporate keen on providing a user-friendly and safe solution.

At present, business units can leverage services that deliver a one-stop, distinct interface to safely display mobile payment encompassing various smartphones/mobile networks. By synchronizing the requirements of service providers and mobile operators, efficient options are being established with unified NFC offerings that are introduced in the market expeditiously.

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Christine is an experienced freelance business and finance writer. Currently writing for Academy of Financial Trading reviews.