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Will NFC Dominate Mobile Payments?

As banks, credit-card companies, smartphone manufacturers and others vie for dominance, much of the buzz surrounds a form of radio frequency identification known as Near Field Communication.
By Mark Roberti
May 30, 2011Last week, Google announced that it plans to offer a mobile-payment system in cooperation with Citibank, MasterCard, First Data and Sprint. The Google Wallet will let owners of cell phones operating Google's Android operating system, and equipped with Near-Field Communication (NFC) technology, pay for goods with a tap of their phone at a point-of-sale (POS) terminal (see RFID News Roundup: Google Unveils NFC-based Mobile-Payments Service). This puts NFC, a short-range form of radio frequency identification, at the forefront of mobile payments. Can it stay there?

The Google Wallet will initially support two types of payments: a PayPass-eligible Citi MasterCard and a virtual Google Prepaid card. If you already have a PayPass-eligible Citi MasterCard, you can add it to Google Wallet, using First Data's Trusted Service Manager service. Or, you can fund the Google Prepaid card with any payment card. (NXP Semiconductors provides the NFC solution for the Google Wallet, and played an important role in creating the application with Google.)

Google's system will initially be available on Samsung's new Nexus S smartphone, which comes with a built-in NFC reader. NFC technology enables the phone to both read tags and emulate a tag, so it can be used to store credit-card information and transmit it to an NFC POS device. Citibank will issue a MasterCard that can be used with the system, which will also include a prepaid MasterCard, so you can load up the phone with money and then go on a shopping spree.

RFID has been gaining traction in the world of financial transactions for the past few years. Millions of credit cards now come with an embedded high-frequency (HF) RFID transponder, using the ISO 14443 air-interface protocol, which limits the read range to a few inches in order to prevent eavesdropping on the data transmission. But many experts believe NFC-equipped phones could make credit cards obsolete. Why have to fumble for your wallet, pull out a credit card and swipe or tap it, when you can simply wave your cell phone—which most of us have handy at all times?

In addition to convenience, NFC-enabled phones, unlike magstripe credit cards, can be password-protected. If you lose your credit card, anyone who picks it up can use it by simply forging your signature. Many phones, however, have a password, and the Google Wallet will require an application-specific password, which will prevent someone else from utilizing your NFC phone to purchase goods.

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