Near Field Communications (NFC) and Mobile Payments

First the Techno Mumbo Jumbo

Near Field Communications is receiving a fair amount of attention in the mobile space in the USA just recently. This is a relatively simple technology relying upon the well known physical principle that the signal strength of the magnetic component of an EM wave transmitted by an antenna starts very great but falls of very rapidly (approximately proportional to inverse cube of distance) within a radius that is termed the ‘near field.’ For practical approximation the maximum extent of significant near field effect is one wavelength though for the compact antenna of a smart phone it would be less – for benefit against eavesdropping and interference this is a beautiful thing! We are talking here essentially about an air core radio frequency transformer where the transmitter and receiver are coils tuned to resonate at the transmission frequency which is in the unlicensed ISM (Industrial, Scientific, and Medical) band at 13.56 MHz and with a band width of 14 KHz. At greater distances than approximately one wavelength the signal strength falls off according the inverse square of distance from the antenna. For practical purposes the signal to noise ratio of any detectable signal at this distance or greater is insufficient to enable communication at reasonable data rate using consumer grade electronics.

The Lo Down on Expected NFC Applications

Summarizing all the above, useful bandwidths of hundreds of kbits per second of secure data transmission are possible via NFC over distances of 20 cm or so. The near field limit where sophisticated instrumentation still has a shot at eavesdropping is of the order of meters. There will of course be protocols for coping with one or two way communication, encryption, and for collision avoidance.

Tip – Relevant standards include the draft standard ISO/IEC 14443 Identification cards — Contactless integrated circuit cards — Proximity cards”

So Whats The Big Deal With NFC?

So why all the fuss anyway? In a couple of words “mobile payments.” You know, wave your phone near part of a gas pump or ticket machine or beverage dispenser and “ka-ching.” Slightly more exotic applications will no doubt abound – how about buying a ticket to a concert by waving your phone near a billboard?

One unique smart phone characteristic from a marketing perspective is that it is much more likely to be intimately connected to one user (how often do you lend your mobile to some one else?) So, combining that fact with ever increasing efforts to track users habits and hardware and correlate them to personal profiles and I think we might soon start to see personalized or location specific or real time pricing to go with personalized advertising?

So, what happens if you leave your smart phone in the movie theater (yes, I’ve done that too)? Are you going to become the proud but remote owner of all kinds of “wave and dispense” merchandise or services over a very short period? At the very least a mobile device typically has a auto timed lock out requiring a PIN to unlock but I’m guessing that isn’t going to be enough. Of course there are myriad application details such as identification, security, commissions, even credit limit, to be addressed. Some of these will be addressed in future postings about mobile security, etc.

Some recent smart phones for the US market already have NFC built in. Expect this to become the norm very quickly.

Not So Revolutionary

Don’t get too excited. The USA is late to the mobile payments party. Many Asian and European mobile users have had some access to this technology available for quite a while. The essential problems in the USA are the normal suspects: lawyers, politics, corporate strategy. However, consumers by and large want this and the lure of increased profit channels has become sufficiently irresistible to all potentially involved and as recently as this November ATT, Verizon, and T-Mobile announced what amounts to the kick off the mobile phone payments story for the USA with the formation of the ISIS joint venture. It turns out that Barclays Bank along with Discover Financial Services are also involved. Roll out is expected in the first geographic markets within 18 months.

More information about ISIS can be found at their website.

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