NFC Battle Recalls Betamax-versus-VHS Struggle

Near Field Communication Should See Off Rival Technologies

It’s amazing how NFC mobile payments continue to divide opinions in the industry. While many players, such as Google Wallet and Visa, have already placed bets on the technology being the future of mobile payments, others remain unconvinced it will ever live up to its hype. PayPal, for example, has voiced its scepticism.

Recently I’ve heard a number of people compare NFC’s position with the battle between Betamax and VHS in the late 1970s and early 1980s. At that time both technologies competed to become the standard format for videotape. Similarly today, we’re seeing NFC fighting off rivals to become the standard format for mobile payments in point-of-sale terminals.

After listening to compelling arguments for and against NFC, I still believe that it’ll eventually come out the winner. My main reason for this is that I don’t see there being a credible alternative. Unlike Betamax and VHS, which were reasonably well matched, NFC is by far the best communication technology for easy and secure mobile payment transactions.

I’ve tried QR code shopping, for example at eBay’s trial shop in London, but I found the experience frustrating. To be honest, it was more of a mobile e-commerce solution than a payment system. I’ve also used barcode scanning at Starbucks. While Starbucks has been one of the few to successfully deploy mobile payments, I have doubts about its security. A customer’s barcode can easily be replicated and there is no way to properly verify the account.

Some rumours in the media suggest Apple might adopt Bluetooth 4.0 for mobile payments. Thanks to its longer range, this technology could allow people to buy things from almost anywhere in a store. But I’m slightly perplexed how this would work in practice. In a crowded shop, how would employees know who had bought which item? And if they don’t need to stand next to the tills, customers might as well make the payment online through a Web site. Apple’s recent patent of a mobile payment system that includes NFC leads me to believe we’re more likely to see something happen in the NFC space.

Of course, none of this guarantees NFC will succeed, and there’s still a lot of work to be done. Unfortunately most of the attention has been focused on the technology itself instead of potential uses that NFC could be put to. For example, NFC could create real value for customers through integrated vouchers, loyalty points and location-based advertising and search. For me, the technology is simply a stepping stone to reach these goals.

I think we’ve reached a tipping point in the industry when so many players have given their support and acknowledged plans for NFC that it’s unlikely we’ll see another technology prevail. NFC’s position is likely to be strengthened as merchants in the US upgrade to support the EMV (Europay, MasterCard and Visa) standard; new terminals will most probably include NFC capability as part of this upgrade.