NFC: If it’s Not For Commerce, what is it for?

Google this week took a small step away from NFC when it expanded support for Google Wallet to any Android device running version 2.3 or later. Rather than depending solely on NFC for the app’s loyalty card features, users can now scan their cards with their phones or enter a barcode, then redeem their rewards at the retail counter with a scanner.

Indeed, NFC for years was presumed to become the go-to technology to support mobile payments, which have yet to gain substantial traction in the U.S. But that once-certain future is seriously in doubt. PayPal appears to have gained modest success with its mobile app, which eschews NFC in favor of a combination of QR codes and other technologies that are supported by a much broader range of handsets. Capitol One, which was one of three founder card issuers behind NFC-based Isis mobile payments initiative, said this week it is pulling out of pilot tests of the carrier-backed program. And Google this week announced the acquisition of the developer of Bump, an app that uses proprietary technology to exchange data between devices when they’re bumped together – similar to NFC.

The looming threat of BLE

Perhaps the biggest threat to NFC, though, is the emergence of offerings such as Beacon, which PayPal introduced last week. Beacon plugs into any power source and is designed to be used by retail outlets and other businesses to detect the presence of shoppers and conduct transactions. Shoppers with Bluetooth-enabled phones – which is to say, almost all of them — are greeted as they walk into the store, and when they’re ready to check out they consummate their purchases on their phones.

Hari Gottipati of Apollo Group touted the benefits of LTE in this informative post at GigaOM last week, Apple’s decision to support BLE rather than NFC in iOS 7. Beacons are affordable for businesses to install, and their range is substantially longer than NFC, eliminating the need for users to take their phones out of their pockets or purses to tap them. BLE also is faster than NFC and can be used to determine shoppers’ location inside the store, providing an opportunity for retailers to deliver highly targeted location-based ads as well as helping consumers make their way through the aisles.

Why NFC still isn’t dead in the water

But BLE’s biggest strength – its range – is also a potential weakness. Few shoppers will enjoy being bombarded with mobile come-ons as they make their way through the mall, so if retailers don’t use BLE judiciously many users will surely turn Bluetooth off on their phones. (The annoying nature of unwanted “proximity ads” is the biggest reason Bluetooth-based marketing campaigns never caught on in the first place.) So NFC could become something of a complementary technology for mobile marketers, rewarding users with discounts or other goodies when they tap their phone against an NFC-enabled kiosk. And NFC’s short range makes it ideal for other advertising vehicles like interactive posters or packaging.

It’s also worth remembering that the infrastructure for NFC-based payments is already being built. I wrote last week that Berg Insight estimates 6.7 million NFC-ready point-of-sale terminals were sold last year, and that number is sure to go higher this year. Those retailers aren’t about to jump ship and suddenly embrace BLE-based systems until they’re convinced those systems will catch on. There’s precious little evidence (outside Japan) that NFC is ideal for mobile payments, and there’s a good chance that BLE actually becomes the technology of choice as the mobile payments market begins to get legs. But that isn’t going to happen tomorrow. Meanwhile, all these competing technologies will only continue to shackle a market that has yet to get out of the gate.