Near Field Communications (NFC) Usage in Retail


NFC at RetailNOW

NFC was included in the content of several presentations at the 2011 RetailNOW conference. Much of the dialogue revolved around NFC and payment, but those attending my presentation on “Retail Stores of the Future” learned that payment is but one of many pieces of the Retailer-Consumer ecosystem where NFC will play a role. By the way, if you didn’t go to RetailNOW this year, you missed an excellent conference. Whether you are a technology provider or a local reseller, I highly recommend that you attend the next RetailNOW conference so you can successfully navigate the sea of change taking place in retail and retail technology.

(Photo courtesy of Google Wallet)

NFC Essential Attributes

• Short range RFID, typically less than 4cm, triggered by proximity

• Invented by Phillips and Sony about 10 years ago

• Three genres: Card Emulation, Reader Mode, & Peer to Peer

• Tags may be powered or unpowered

• Any MIME data can embedded on NFC tags

• Relatively slow speed, not suitable for transferring large amounts of data

NFC Usage in the Retail Vertical

NFC will become the Consumer’s preferred method of communicating with the physical world because it possesses attributes which Consumers demand: fast, simple, transparent technology, and so easy that it requires no thinking. Usage cases include:

Passive tags. Passive tags are tiny, inexpensive, unpowered, and can be affixed to any physical object. When tapped by an NFC-enabled phone, the physical object becomes virtualized and information appears seamlessly on a Consumer’s phone.  The information displayed should aid the Consumer in making a purchasing decision, and could include: connection to the merchant’s social media site of choice (Twitter, YouTube, Facebook, etc.); product reviews; or attributes of the item like size, color, etc.

Identification. Tapping a phone on a check-in poster at a store informs the Merchant that the Consumer is here. Once identified, personalized communication begins between the merchant and Consumer using Peer to Peer NFC dialogue or Consumer receipt of a cloud-based message sent by the merchant. Examples include: limited time offers; award of loyalty points; daily menu specials; and VIP greeting from the manager.

Stored Value and Payment. NFC in card emulation mode allows a phone to function as a credit card. But, there is some turbulence surrounding regulation and approval of usage of Mobile Wallets with PCI data resident in a handheld device.  An alternative approach leverages NFC to use a cloud-based Mobile Wallet for redemption of stored value, loyalty-based currency or conventional payments. The potential for NFC to facilitate payment outside of the POS, where PCI relevant data never makes it into the store, is an interesting but controversial and disruptive evolution. Equally controversial is the potential for the merchant to change Consumer behavior at the point of purchase by sending incentive messages to the Consumer to entice them to change their intended method of payment to one that the merchant pays less to process.

Business Intelligence. Presuming the Consumer opts-in to allowing their activities to be tracked, holistic data about Consumer buying habits becomes available to the merchant.  The potential exists to provide the Holy Grail of marketing:  where a consumer shopped; what they looked at; which marketing incentives they paid attention to; what they purchased; and how they paid. Business intelligence applied to the aggregated data allows merchants to make better decisions regarding the content and timing of personalized messages they send to their loyal customers.

When NFC will be in Common Use in the U.S.

Although he U.S. has been slower to adopt NFC, the NFC tide is rising rapidly in North America. NFC is already in common use in Japan, Western Europe, South Korea and Australia, with NFC initiatives underway in 20 additional countries this year. Reasons why the U.S. has been slow to adopt NFC are numerous, with a detailed explanation being beyond the scope of this article. The first NFC-enabled phone, the Nexus S, appeared in the U.S. earlier this year, with additional NFC phones from Nokia and RIM available by the time this article is published. Global experts vary in their projections, but they all agree that NFC usage will increase at phenomenal rates over the next 3 years leading to hundreds of millions of NFC-enabled handsets in use by 2015.

When to Get Involved

It is still pretty early in the NFC game in the U.S. and it is no secret that fragmentation exists as a result of NFC turf wars occurring between competing members of the U.S. retailer-consumer ecosystem. The current fragmentation will be resolved and some trail-blazing multi-unit operators and retail technology providers already have NFC initiatives in place. I predict that most retail technology companies and multi-unit retail operators will begin to include an NFC initiative in their executive strategies in 2012, so if you haven’t already given thought to where NFC fits in your world, now is the time to start thinking about it. My advice is to be aware of the struggle for NFC control that is taking place, and choose your NFC partners wisely. Your NFC initiative can have a foundation built by one of the large stakeholders in the consumer-retailer ecosystem, or you can pour your own foundation using universal SDK and NFC chips with no strings attached to them.  There are compelling value propositions that support both positions, but be aware of limits on your freedom of action or your customers’ freedom of action that may accompany closed systems offered by some NFC stakeholders.

RSPA_Blue_100wReprinted with permission ©RSPA – Retail Solutions Providers Association. 



Todd Cripe

Todd’s current primary engagement involves executive-level responsibility for the direct and indirect sales channels of Lifera, Inc., a cloud-based solution that leverages NFC, smart phones, and POS to unify all the members of the consumer-retailer ecosystem.

 Related articles:

Near-field Communication (NFC): An Emerging POS Technology for Retailers

Mobile Payments 101: Integrating Mobile Into a Retail Environment

Pay With Your Phone: MasterCard PayPass, Google Wallet, and Mobile Payments

Selecting a Payment Processing Terminal for Your POS

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