NFC: Under-hyped, ready to over-deliver

Near-field communications, or NFC for short, is on the cusp of making e-commerce look like chump change, and much more quickly than most people think. The naysayers have arrived, and that’s a good thing: it means this disruptive technology is about to take down their business.

Most of the hype surrounding NFC is about payments – the ability to wave your phone at a point of sale terminal instead of whipping out a credit card or cash to buy that grande vanilla latte.

Speculation has it that if Apple or Google can make NFC chips in phones a mainstream payment option, they could upend the payments industry and put themselves smack in the middle of billions of dollars of transactions. Apple, pundits opine, could tie the mobile wallets to people’s iTunes accounts, and Google could tie it to Google Checkout.

If that’s all there is to it, then the naysayers are absolutely on the money. But NFC payments are the least of the mobile commerce equation.

(Editors note: this discussion about mobile payments and commerce is one of the five themes we’ll debating at the VentureBeat Mobile Summit, on April 25-26. For payments, we’ll have the top executives in the sector around the table, including representatives from Verizon, AT&T, Sybase, Zong, Boku, Visa, Square and disruptive credit card company Dynamics Inc. If you think you should be part of the discussion, you can apply here. Also, see our past articles about why NFC is overhyped, or why NFC matters. More on the series here.)

What will turn NFC from promise to reality is real-time, in-store personal marketing, merchandising and loyalty. Mobile wallets were never envisioned to deal with just debit and credit accounts. They’ll also hold your gift cards, coupons, admission tickets, transit tickets, and all of your loyalty cards for offers and promotions.

That’s how the merchants will make money and why mobile retail applications are beginning to proliferate today. And it’s where consumers will realize real value and convenience.

All of the other mCommerce ecosystem components – phones with NFC chips, contactless point-of-sale terminals at every retail register, back-end software that connects the banks, card issuers, and merchants – are simply a means to this end.

Because if merchants can’t make money and grow their business, and consumers don’t experience the technology as a better, faster, cheaper way to shop, then NFC will simply never happen.

The good news is that merchants get it.

NFC phones let them deliver high-value, personalized offers when you’re in their stores – offers that give you what you want, when you want it, based on your search and buying patterns. First-mover merchants are looking to grab a competitive edge and gain new ways to influence your buying behavior using time-limited sales and product-specific information from shelf tags. And best of all, from their perspective, NFC allows them to gather unprecedented amounts of new data on your likes and dislikes for future promotions and offers, such as opt-in deals you will value.

The naysayers would have you believe that rival mobile technologies like SMS or barcodes are good enough, and that they can do everything that NFC promises. But in the end, NFC will win the in-store battle for five simple reasons: it’s way faster and easier to use, it’s infinitely more secure, it has a much lower cost to scale at the point of sale, and it’s fully interactive near, in-store and at the point of sale.

NFC mCommerce is going to be huge. It will much bigger and grow much faster than ecommerce ever did.

That’s a bold statement, but here’s why: your smart phone is in some ways a much more powerful commerce device than your computer. It knows who you are. It knows when you are near or in your favorite stores. It can quickly access your search and purchase history. And best of all, it delivers instant gratification.

There are already five times more mobile phones than PCs in the world. And, in-store sales currently out number ecommerce by 19 to 1. Those are two things that are guaranteed not to change anytime soon.

By Christmas there will be about 35 million NFC-equipped mobile phones in the hands of consumers, and the experts predict that will grow to 1.5 billion phones worldwide in four short years.

Global security mandates for transaction processing are right now forcing upgrades to millions of retail point of sale systems around the world that cost a few hundred dollars each. As a result, consortiums are coalescing and rumored to be subsidizing NFC readers because big returns are so close they can taste them.

For the first time ever, instead of competing the three largest U.S. mobile operators — AT&T, T-Mobile, and Verizon — are collaborating to build a nationwide mobile 
commerce network utilizing NFC-equipped phones. Meanwhile, banks and tier-1 merchants are issuing NFC software and systems RFPs.

It’s no secret that web players like Google, Amazon, Yahoo!, Facebook, Microsoft, AOL, and Apple which collectively already own most on-line ad spending and shopping, want and need a way to do the same in the physical world. NFC is just the ticket, because it’s the proverbial bridge that seamlessly connects the virtual and brick-and-mortar markets.

So, get ready, world. Stop thinking mobile payments when you hear NFC, because payments are just the tip of the iceberg. And start thinking about a totally new medium – a brand new mobile advertising and shopping platform for mobile devices. Then you’ll understand why NFC mobile commerce is here and happening. Naysayers be damned!

Michael (Mick) Mullagh is CEO of ViVOtech, the NFC software and systems company based in Silicon Valley. He submitted this story to VentureBeat as part of a series leading up to our Mobile Summit later this month.