Rochester Business Journal

With her wedding anniversary just days away, a woman walks into a jewelry store to buy a new watch for her husband. After browsing for a while, she charges the gift, uses a digital coupon, earns customer-loyalty points without digging in her purse for a plastic key tag and gets a digital receipt, all by tapping her smartphone on the checkout terminal.
 
Underpinning the sale is near field communication, a technology that links smartphones and related devices through radio communication whenever they touch or come within a few centimeters of each other. Though it is not yet widely used in the United States, Asian and European countries have adopted the technology more rapidly, including contactless payments for bus and subway fares.
 
Near field communication, often called NFC, has made inroads with a few national retailers, including Macy's and Whole Foods Market, but has not yet gained much traction in the Rochester area. Tap-to-pay customers typically use Google Wallet, an NFC app that facilitates making purchases, accumulating loyalty points and redeeming gift cards with their smartphones, but doing so requires that stores have point-of-sale terminals to support the technology.
 
Rochester-based Wegmans Food Markets Inc. supports Google Payments in newer stores, generally those built in 2011 or later. Google Payments allows tap-to-pay but does not support other types of transactions.
 
"Our future plans are to equip all of our stores with the ability to accept various mobile payments and/or mobile wallets. However, we do not have specific plans for what we will accept or to what degree we will opt into any specific programs," says Jo Natale, spokeswoman for Wegmans.
 
While its uses range from commercial transactions to sharing files, photos, electronic business cards and multi-player games, local mobile and information technology experts differ on the staying power of near field communication. Rivals such as the electronic payment service Square have GPS capabilities that near field communication does not, putting the latter at a disadvantage in monitoring and anticipating consumers' habits.
 
"I believe near field communication has huge potential for both use and abuse," says Lee Drake, president and CEO of Rochester-based OS-Cubed Inc., which offers services ranging from applications and website development to social media consulting. "I think it's not really just an emerging platform but an inevitable one."
 
He expresses a security concern about NFC.
 
"Frankly, I prefer it for nonpayment-oriented authentication at this point (which would include loyalty cards)," Drake says.
 
Non-commercial uses for the technology are likely in the offing, such as allowing keyless entry at hotels and remotely controlling appliances.
 
Eric Miltsch, Rochester-based director of product strategy at drivingsales.com, regards near field communication as a "clunky" e-commerce solution.
 
"My whole theory is that I don't think (retailers) have a huge need for better transactional elements," says Miltsch, developer of CarZar, a free automotive location-based photo-sharing app for the iPhone. "I think we have a need for better relationship elements."
 
He adds: "There are other opportunities coming down the road, like (Apple's) Passbook, that allow for a little bit easier usage but also ... the ability to create better (customer) recall, to create better post-sale relationships or even presale relationships."
 
GPS-enabled Square has a leg up on near field communication because it can alert retailers when repeat customers cross the threshold. The platform also pulls up those patrons' names and photos, a boon for customer relations.
 
Because NFC relies on smartphones touching or being near point-of-sale terminals that support it, returning customers are virtually invisible to retailers until they make a purchase.
 
Near field communication may seem brand new, but it has existed for years in the form of radio frequency identification, says Wasim Khaled, CEO and co-founder of LuxMobile Group LLC, a Rochester-based mobile-device accessory company.
 
RFID, as it is known in tech circles, hinges on a wireless non-contact system using radio frequency electromagnetic fields to transfer data from a tag attached to an object, for the sake of automatic identification and tracking.
 
"It hasn't really changed much since its inception. I mean, today's NFC is really like a passive RFID frequency, and ... personally I've always believed there was a lot of potential for a lot of conveniences using it," says Khaled, who once owned a company that manufactured RFID locks for homes.
 
In the past, "the conditions have never really been right for (near field communication) to spark off," Khaled says. "But it's definitely going to change, starting this coming year."
 
Besides the reluctance U.S. retailers have shown so far to invest in point-of-sale terminals that support the technology, another obstacle is that not all smartphones have NFC capability. Phones that do have it include the Samsung Galaxy S3 and the LG Optimus Elite.
 
In a move some technology experts regard as a blow to near field communication's future, the new iPhone 5, which Apple released in December, does not have the technology. Apple, however, has created Passbook, a digital-wallet app that can hold gift and loyalty cards, coupons, airline boarding passes and event tickets but does not yet support straightforward tap-and-pay.
 
Apple's decision not to include NFC in the latest iPhone partly boiled down to engineering choices, Drake says.
 
"Anytime you're building a small device that's compact and uses a battery and things like that, you have to make choices," he says.
 
Apple made the right call in not including near field communication on the new iPhone 5, says Miltsch, who likens NFC to a one-way street. Consumers are not looking for a different way to pay for goods and services per se, but they do want convenience to permeate sales transactions.
 
"You know, nobody likes waiting around for their coffee," he says.
 
Consumers play a pivotal role in encouraging the technology's adoption, adds Drake, who recently bought an NFC-equipped Samsung Galaxy Note 2 smartphone.
 
"It's sort of a chicken-and-egg thing," he says. Retailers must decide whether to invest in the point-of-sale technology "and hope consumers see and use it, or do (they) wait until consumers ... ask for it."
 
Credit companies' increasing commitment to near field communication will push the technology forward, says Khaled, who is now considering ways in which LuxMobile could develop NFC tags. When coupled with other emerging technologies, he says, "it's definitely going to lead to global mobile wallets being very mainstream."
 
Miltsch has a different view on NFC's future.
 
"As much as I love the next new shiny object, I'm not using it," Miltsch says. "I'm just barely using my Passbook now."
 
Sheila Livadas is a Rochester-area freelance writer.1/4/13 (c) 2013 Rochester Business Journal. To obtain permission to reprint this article, call 585-546-8303 or email service@rbj.net.