Near Field Communications Might Just Make Your Wallet (or Purse) Obsolete

by Tom Sandford
Woman paying with NFC technology on mobile phone, restaurant, ca

Since the day smartphones first wiggled their way into consumers’ pockets, they’ve changed the way we live, communicate and do business. With a few mere swipes of the finger, America’s 250 million smartphone users have learned to use their handsets as personal computers, word processors, personal assistants, novels, newspapers, television remotes and even GPS systems.

But what many consumers don’t know is that smartphones are poised to take over our wallet duties as well, thanks to the growing field of Near Field Communications (NFC).

By utilizing a series of secure and instant wireless burst communications, NFC-enabled devices (like cellphones) can be “swiped” against others to complete credit card purchases, pay bills, transfer money from phone to phone or work as an automatic train pass, in a process as simple as bumping fists with your best friend (and almost looks as cool).

According to a study by Forrester Research, more than a quarter of all U.S. consumers will carry NFC-equipped smartphones by 2016, making the field an increasingly ripe and lucrative branch of technology for both consumers’ and producers’ reaping.

Where It’s Going (And Growing)

For proof NFC technology is on the rise, investors need simply look east, where a sharp rise in middle-class incomes has triggered an explosion in smartphone popularity. As early as 2011, China surpassed the U.S. as the world’s largest smartphone market with 700 million users.

And for 41% of Chinese smartphone buyers, it was their first smartphone purchase. Unlike the smartphones offered to America’s earliest adopters, many of these late-model phones already come equipped with NFC devices, including Samsung’s (OTC: SSNLF) popular “Galaxy” line of smartphones.

That means the door for opportunity has swung wide open for NFC-enabled buyers, sellers and investors - whether the actual transaction takes place in Shanghai, Shenzen or Cincinnati.

And the potential for NFC deployment continues to crop up in the most unlikely of places. Even Kenya, where 67% of new mobile phones sold (or roughly 100,000 per month) are smartphones.

Of the thousands sold last year, at least 400,000 of them were Samsung handsets compatible with NFC-enabled SIM cards that will be issued by Kenya’s largest service provider, Safaricom Ltd. (OTC: SCOM) , for mobile payment purposes later this year.

The point is, if NFC technology is simple, affordable and efficient enough for the country that ranks behind 197 others in per-capita yearly income, then the margins for investment could be astronomical.

What It Promises

The beauty of NFC technology is in its simplicity as an independent, simple payment that can be used as a “digital wallet” of sorts - a quality that American Express (NYSE: AXP) has decided to capitalize on with the release of its own NFC-enabled mobile payment application, American Express Serve.

What’s more, the application can be funded independently, which would give a viable alternative to cash for the 70 million Americans who are ineligible for credit or lack bank accounts, the company says.

Similar offerings - including Google Wallet from Google Inc. (Nasdaq: GOOG) - fulfill even more fanciful functions and can serve as repositories for user retail rewards programs that are automatically run with transactions, saving customers the hassle of typing in phone numbers or fiddling with member cards.

Where It’s Headed

As the NFC field continues to branch out into the global community, companies that have long resisted or ignored the field are facing increasing pressure from competitors and consumers alike. For example, leading smartphone maker Apple Inc. (Nasdaq: AAPL) has been forced to reconsider the exclusion of NFC technology from its popular iPhone line after scrambling to recover the 9% of market share it lost from 2012 to 2013, according to CNET.

Apple’s recent NFC-related patents have sent rumors flying about the possibility of an iPhone 6 equipped with NFC, according to The Motley Fool, but can’t be confirmed until the notoriously tight-lipped tech giant decides to divulge the details.

Meanwhile, top cellphone service providers - including AT&T Inc. (NYSE: T), T-Mobile (NYSE: TMUS) and Verizon Wireless (NYSE: VZ) - have already jumped on the NFC bandwagon with the joint development of the Isis mobile wallet payment method, which debuted at the end of 2013.

The NFC mobile wallet realm has also unlocked the door for collaboration between cellphone service providers and credit card companies. For example, phone providers tapped JPMorgan Chase (NYSE: JPM) and American Express as account providers for Isis’ services

NFC Investment Is Calling - Should You Answer?

If the slow, but steady, worldwide adoption of smartphone-based NFC technology is any indication, then absolutely. Expect to see more collaboration between leading tech companies who seek a bigger share of the emerging market by pairing up with the most unlikely of bedfellows, in some cases.

The investment potential will only grow if Apple decides to get on board. The NFC ship will set sail regardless, so don’t get left on the pier while the opportunity steams over the horizon.

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