What is it?

Near Field Communication (NFC) is a short-range wireless technology, commonly used for contact-less payments. Payment with NFC is fast, simple and efficient, and requires no pin, signature or secondary verification for payments under AU$35.  NFC payments are therefore suited for high-speed, low value transactions such as transport and convenient store purchases.

Small is better

NFC works over a very small distance – in fact it’s maximum range is just 8 inches, and is commonly restricted to just one centre-meter.  Why is this a good thing?  You wouldn’t want your credit card making purchases for you from half-way across the room.  Whereas Bluetooth and WiFi have a range of some 10 to 30 meters respectably, NFC’s tiny range makes it the perfect contact-less solution for carrying out local transactions.  

How does it work?

Using a small integrated microchip, a user’s payment details such as their debit or credit card details or their transport or event ticket details, are loaded securely onto the chip.  The user can then make contact-less transactions or scan for entry onto transport, or into sporting grounds or events, simply by touching it to an equipped Smart-card reader.

The payment process is ideal for prepaid – NFC chips can easily be stocked up in advance, or re-charged with credit and then used as payment: affording users even greater security as lost or stolen cards can easily be cancelled, and their credit transferred onto another card .

World Leaders in innovation

One of the most interesting uses of the technology is the "osaifu keitai" – meaning “wallet phone” in Japanese.  Dissatisfied with cumbersome cards and purses, the Japanese are leading the trend of integrating NFC into their mobile phones.  According to the country’s largest telecommunications operator, DoCoMo NTT - there have been some 26.4 million NFC-equipped mobiles sold in Japan to date , and over 310,000 outlets equipped with readers around the country .  Soon the Japanese will be even be able to pay for cab-fares simply by touching their phone to the in-car reader.  

Across the sea in Hong Kong – there are currently 16 million Octopus NFC cards in circulation, carrying out 10 million transactions every day, for the island-state’s 7 million people.  Besides Smart cards, NFC has now been introduced into Smart Watches and even Smart Key-rings.  Residents of Hong Kong have been paying their transactions with Hello Kitty key-rings.  Octopus Smart Cards are accepted by more than 50,000 processors throughout Hong Kong – not bad for the small Chinese state with a total land-mass less than a tenth the size of Sydney.

Closer to home

Here in Australia, NFC is still in it’s early stages.  The first planned NFC-system, the T-card; first conceived as a Smart-card transport ticketing solution for the Sydney 2000 Olympics, underwent several trials but never came into fruition.  With Beijing 08 due to start in just a few months, residents of Sydney may well be wondering “Where are our Tcards?”  The pin was finally pulled for good on Tcards in January this year at a loss of some 60 million dollars to NSW taxpayers - with the NSW State Government locked in a legal battle with former partner ERG over the cancelled contract.
Across the Nullabor, the Western Australian Government has experienced far more success.  Commuters in Perth have been enjoying the benefits of Smart Card travel for the past 18 months since the Smartrider system became available city-wide in January 2007.  Obtainable for purchase or top-up on buses and ferries, authorised retailers, Add-value (EFTPOS) machines at transit stations, and through BPAY – Perth residents were the first in the country to ‘Tag-on’ and ‘Tag Off’ – the Smart-card process of calculating a fare; you tag your card when you get on and off public transport and the reader automatically calculates your distance and deducts the appropriate fare.
South East Queensland became the most-recent region in the country to adopt NFC to their public transport when the Queensland State Government rolled out the Go card in February.  Available at 110 points from the Gold Coast up to the Sunshine Coast, Go cards can be purchased at Supanews, 7/11 and selected independent retailers, as well as transit stations and online.  Like the Smartrider, Go cards are prepaid.

But it’s not just the transportation industry that’s getting into NFC.  The Commonwealth Bank became the first Australian bank to trial contact-less technology when they gave away 50 Smart-Phones and 3000 Smart-Cards at last November’s Mastercard Masters in Huntington Victoria.  The cards and phones used Mastercard PayPass technology and were each loaded with AU$25.  Participants were encouraged to use them to purchase anything from food and drinks to souvenirs, at any of the retailers at Huntingdale Golf Course - All of which had been set up with MasterCard PayPass readers.  The Commonwealth Bank has already begun issuing contactless credit cards to customers, currently issuing 60,000 PayPass cards to customers every month.

Telstra, Visa and NAB conducted an experiment of their own earlier this year when they allowed 250 customers to pay for goods and services with their mobiles in selected equipped stores.  Customers were able to purchase goods of up to AU$35 without pin or secondary verification.

Along with a number of other emerging trends e-pay are keeping a close eye on new technology platforms relating to NFC, both here and abroad.  What we are looking to find out - is what advantages NFC can deliver to our retailers, to ourselves and to the customer, for the successful distribution of new products and new opportunities.  Of equal importance is timing.  To ensure successful integration, it is essential that future NFC products releases are timed to coincide with the acceptance and accessibility of the technology in the market.
 
In other markets such as Hong Kong, London, and Singapore, Smart-transit solutions have been the catalyst for the widespread launch, acceptance and use of NFC.  Whilst possible in Australia now, the lack of a centralised transportation system has meant a state-by-state proposition rather than national appropriation..  These are the kind of circumstances e-pay are following very closely to be sure when is the right time to move into this market.  

Be assured that here at e-pay we’ll continue to bring you the latest technological innovations as soon as they come to fruition and can represent real revenue growth for you.

Snapshot - NFC around the World

Asia

Japan NTT DoCoMo has provided over 26 million customers with wallet phones that can be used at over 310 00 NFC readers nation-wide - using Sony’s FeliCa system.

Hong Kong There are 16 million Octopus NFC cards in circulation with 10 million transactions carried out every day.  This amounts to 1.4 NFC transactions per person, per day.

China Octopus have expanded onto the mainland in Macau and Shenzen and is now looking to introduce NFC into watches and key-rings.

Singapore Ez-Link and StarHub launched a six month trial last year with over 20 000 payment acceptance points in both the public transport and retail sectors.  Both companies announced that they were pleased with the trials.

Europe

U.K. Nokia has added NFC technology to some its handsets, which can be used for the Tube transport system. Mobile operator Orange is experimenting with NFC-enabled mobiles for Manchester City FC ticket-holders to gain access to the grounds.  London residents use NFC Smart-cards for the Tube.

France NXP (Philips) collaborating with FeliCa Sony in Caen conducted a trial last year in public car-parks, supermarkets and monuments installed with NFC readers.

Germany Nokia and Giesecke & Devrient (banking organisation) have announced the release of Venyon NFC Smart-cards available for use on public transport.

North America

USA HSBC conducted a 6 month NFC trial using MasterCard Paypass allowing 200 employees in New York and Chicago to use their phones to purchase goods up to US$35 across 35,000 retail outlets.  Nokia and MasterCard announced a NFC mobile trial earlier this year in Spokane, Spokane, Washington.