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Touch Point

With more phones now able to employ NFC, has its time finally arrived?

Illustration: Oliver Munday and Lecluyse

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Last month, Google and American Eagle Outfitters held a "tapping spree" at the retailer's store in New York's Times Square. Visitors were loaned phones preloaded with Google Wallet and a $10 gift card, then let loose in the store, where special deals could be downloaded by a tap of the phones against specific signs. Shoppers then redeemed their chosen offers by the cash register with one last tap onto an NFC-enabled device.

The event was designed to spread word about Google Wallet, an app which so far is available on one phone only (the Sprint Nexus S 4G). But it also helped illustrate the wider possibilities that the technology on which it's run, near-field communications (NFC), might offer.

The promise of widespread NFC technology has tantalized the tech world for nearly a decade, and for good reason. It has the potential to transform industries as diverse as health care, banking, government, and transportation. And importantly for marketers, it could also change the way consumers buy goods and the ways those goods are marketed.

Companies, including MasterCard, Microsoft, Samsung, Sony, and Nokia, back the technology (and have board members on the NFC Forum, launched in 2004), excited in part by its use for cashless transactions. Ad agencies are exploring its possibilities as well.

In The Razorfish 5, Razorfish's recent report on five transformative technologies, vice president of mobile Paul Gelb and technology lead Heiko Schweickhardt single out NFC as something that will "open up nearly unprecedented opportunities for ad revenue and groundbreaking consumer experiences."

Chia Chen, senior vice president and mobile marketing practice lead at Digitas, adds, "Essentially, NFC will enable our industry to confidently state that this specific consumer saw and interacted with our NFC-enabled ad, in this location, and that they subsequently purchased the advertised product at this store. That's a big deal."

Indeed, Debbie Arnold, director of the NFC Forum, even notes that the "killer app" for NFC may actually be advertising.

But despite advocates claiming 2011 would be the year NFC finally takes off, actual adoption remains largely hypothetical. It's hard to find a marketer or Web company that doesn't say it's excited about NFC, but it's almost as difficult to find one that's actually using the technology in significant ways.

Based on inductive coupling--where circuits from two given devices exchange information--NFC works by touch. When an NFC-enabled phone is tapped against another NFC chip (or waved in close proximity), the two devices swap data. Because it's short range (the maximum is some 2 centimeters), it's ostensibly more secure than, say, a Bluetooth connection. The most obvious application is payments, as NFC can transform phones into mobile wallets.

In many ways, the technology, say experts, could be seen as an improvement on the QR code, a Rorschach test-looking label applied onto goods (magazine pages, packaging, posters, etc.) that swaps information--e.g., it can connect a user to a website--in only one direction.

If NFC offers such advantages, what's the holdup? The main obstacle to widespread use has been the lack of NFC-enabled devices on the market. For one thing, it's not yet available on the iPhone. Forrester analyst Thomas Husson says that until this year, the amount of phones available supporting the technology was "ridiculously small." Naturally, companies don't want to bet on a technology not yet in the hands of a large consumer audience.

It's clear that while companies are eager to explore NFC, few are ready to make a commitment. CEOs from startups Loopt and shopkick, for instance, spoke to Adweek about the possibilities NFC might create for their companies, but acknowledged they hadn't turned them into a reality due to the lack of NFC-enabled phones in people's hands.

"Once it's widespread, we will be the first to use it," says shopkick CEO Cyriac Roeding.

Another obstacle for NFC, common with new technology: the need to convince consumers that there's value in adopting a new behavior--especially when it comes to using a device as a wallet. Even those optimistic about NFC acknowledge that if people are really going to learn a new way to pay, it has to present big benefits.

"NFC has to offer something more than just convenience to take off," says Loopt founder/CEO Sam Altman. "Swiping a credit card is already really easy--easier than some NFC payment apps I've seen, in fact."

But PayPal's director of communications, Anuj Nayar, says the resistance to NFC is changing due, in part, to a larger shift in the shopping experience as retailers try to come up with mobile strategies. PayPal has announced some NFC initiatives of its own--including an Android app that allows two users to tap their phones together and transfer money between PayPal accounts--but is approaching it as an experiment.

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