Get Ready For Near Field Communication

While the major U.S. mobile providers are battling over who has the fastest data network, Google appears to be aligning the stars for Near Field Communication (NFC). At the Web 2.0 Summit last month Google CEO Eric Schmidt demonstrated the near field communication capability of the forthcoming Samsung Nexus S. Google is promoting NFC as a means for making payments with mobile phones.

The idea is that you will be able to authorize payments at cash registers using your mobile phone, which uses NFC to communicate with the cash register, or a device connected to it. The NFC chip that Samsung has announced allows instant communication between NFC devices that can be handed off to Bluetooth or WiFi communication for faster data transmission.

While Google appears to be working on enabling phones that run Android to be used for wireless payments, both Visa and Mastercard are working on similar technologies. Visa and Bank of America are testing NFC chips that are combined with microSD memory cards that can be inserted in phones that have microSD card slots, and they are running a trial of this technology in New York. Mastercard is working with Nokia to incorporate their “PayPass” technology in Nokia phones. You can use PayPass with special versions of Mastercard credit cards today at places like McDonalds and Best Buy.

The mobile providers also want in on the wireless payment market, and Verizon, T-Mobile, and AT&T are forming a joint venture to build a mobile commerce network that utilizies NFC chips in mobile phones. The fact that three competitors like Verizon, T-Mobile, and AT&T will work together reflects the opportunity that they think near field communications provides. According to GigaOM, as much as $633 billion could be transacted via mobile payments by 2014, and the fees that will be included in all of those transactions is a huge revenue opportunity for these companies.

Using mobile phones for payments is not new in countries outside the United States. People in Japan and Finland have been able to may payments using their phones for several years. It is clear that the battle is now on for who will sell the first phone in the U.S. that can make mobile payments (Google intends to be the first) as well as who will provide the payment network (the mobile providers, Visa, and Mastercard are battling it out over providing the network and collecting the fees). I expect we will be hearing much more about Near Field Communication at this year’s Consumer Electronics Show.