The Future of NFC and Mobile Wallets

Secure, seamless passage through the airport...

Sensors deployed at touch points throughout the airport could validate the boarding pass, stored as a token on the passenger’s phone, as they journey towards the aircraft. The technology which has received the most attention for communicating the boarding pass information from the phone is Near Field Communications (NFC). With a sim card, it is secure, fast, and easy to use. It could also address deficiencies of existing mobile 2D barcoded boarding passes (BCBPs), which can only be scanned when visible on the phone screen.

That means the passenger has to spend time preparing by unlocking the phone and finding the barcode which maybe a link embedded in an email or SMS, or within a phone app. The phone also needs to be kept ‘alive’ to avoid it going into power-saving mode at the moment of scanning.

There are signs that passengers have become resistant to using a phone at airport check points because of the perceived complexity. Some airports are also privately questioning whether mobile BCBPs are compatible with the fast throughput requirements of an airport.

Is NFC the Answer?

On the face of it the issues associated with mobile BCBPs should open the door for NFC to be adopted for air travel, but that is starting to look less clear cut.

In the wider world, NFC has been ham-

pered by a lack of capable mobile phones, disagreement over standards by entrenched stakeholders, and an unclear value proposition for retailers due to the high cost of point-of-sale (POS) equipment.

Airlines are understandably hesitant to invest in a new technology that is still far from mass adoption and carries the risk of being overtaken by the rapid pace of consumer innovation. Results from the latest SITA/Airline Business Airline IT Trends Survey indicate that the majority of airlines are taking a wait-and-see approach to using NFC technology for the next generation of passenger processing. Some observers believe air transport industry adoption of NFC will depend on how well the technology is embraced by con

sumers for mobile payments in general and in particular, how the battle over mobile wallets plays out.

Paying the Price

Mobile wallets are expected to be the next big thing that will persuade consumers to leave their plastic cards at home, and also like a physical wallet, become a repository for other pieces of identity, including coupons, loyalty cards, and boarding passes. They aim to provide a means of payment that can be used on-the-go in both the online and real world. While paying for goods and services online with just a couple of clicks is now a familiar part of everyday’s life. Any new approach has to offer either significantly more convenience or reduce risk (and therefore cost) for the buyer and the seller. Generally, there are two ways to pay in a physical outlet using your smartphone.

The first is with NFC. By installing a mobile app, such as Google Wallet, and storing your bank and credit card details, you can use an NFC-equipped phone to pay from the account you choose by tapping the phone on an NFC payment terminal at the checkout.

A method more commonly used now is cloud-based mobile payments. It requires the download of a mobile app, such as PayPal or Square Wallet. The app links to your payment details stored online and you make payments by tapping a payment button on your phone or displaying a 2D barcode for the retailer to scan.

The battle over mobile wallets is more than just about competing technologies. Global giants from financial, telecom, technology, and the retail world want to use mobile payments to generate new revenue, own customer relationships, and gain valuable data on buying behavior.

Where is the Mobile Wallet Going?

The size and significance of the players involved means it is unlikely that one single mobile wallet or payment platform will become dominant. Most people have a few debit and credit cards in their physical wallet and this behavior is likely to be mirrored in the virtual world with consumers using multiple apps and wallets on their smartphone. There will be a consumer pressure for interoperability between mobile wallets in the way that bank ATM networks eventually linked so that people could use any bank card at any ATM.

NFC is a Long-Term Bet

The issues that have dogged its progress so far are starting to be resolved. There are now more than 100 phone models on the market with NFC capability, as well as a number of tablets and other wireless devices. Deloitte estimates there may be as many as 300 mn NFC smartphones, tablets, and eReaders sold in 2013.

There is also no mutual exclusivity between cloud-based payments and NFC, so co-existence is a likely scenario, with each supporting the retail services for which it provides the best solution. In fact, mobile wallets that integrate NFC technology with a cloud-based system are also starting to appear.

The latest version of the Google Wallet is among the first NFC-based wallets to store the owner’s payment credentials in the cloud rather than in the secure element of the phone.

Mobile Wallets can Play an Important Role in Air Travel

Mobile wallets could offer both facilitation and revenue advantages to airports and airlines, but is it enough to justify NFC deployment? Linking boarding passes and payment mechanisms within the same mobile wallet, provides multiple advantages for airlines and airports. The boarding pass identifies the passenger

and authorizes them to move through the transport system, while providing travel providers with the opportunity to use the simple and convenient multi-currency payments capabilities of mobile wallets to tempt passenger with personalized offers at each step of the journey.

Duty free purchases are an obvious example as both boarding card and payment are required to complete the transaction at the airport. But last minute seat upgrades or pre-ordering onboard services, such as meals or Wi-Fi, could also benefit the passenger and boost the topline of airlines. Store the frequent flyer membership in the mobile wallet as well and the opportunity to offer special incentives tied to loyalty schemes become a real possibility.

NFC Adds Value to Mobile Wallets

What makes mobile wallets more interesting to airlines and airports is combining them with NFC. It can make for faster boarding compared to mobile 2D BCBPs. Passengers can transmit a boarding pass using NFC with just a tap of the phone screen. Japan Airlines (JAL), which introduced the first NFC boarding passes, has demonstrated that it can board 450 passengers in just 10 minutes if 70% use NFC technology with the remaining using paper BCBPs.

In addition, NFC-based mobile wallets are seen much more secure than 2D barcodes, particularly if they are linked to the mobile phone’s SIM card. This brings two advantages. First, it can reduce the risk factor associated with mobile purchasing by turning a ‘card not present’ transaction into a ‘card present’ transaction, which attracts lower handling fees from banking institutions. Secondly, SIM-based NFC mobile wallets can work even when the phone is switched off or out of battery. That means a mobile boarding pass can still be transmitted, reducing last minute anxiety for passengers.

Conclusion—NFC Requires Wider Adoption

As Paul Coby, SITA Chair put it “If you trust a technology for your money, you trust it for everything.” Embracing NFC will depend on adoption of mobile wallets outside the industry. Widespread use of NFC for retail will act as a catalyst for developers to build new apps creating a whole new ecosystem of connected mobile services for the travel market.

With an eye on global industry adoption, IATA is evaluating the facilitation aspects of NFC as part of its Fast Travel initiative, with a specific focus on checkin, bag drop, security checkpoints, and lounge access, as well as the retail opportunities. It aims to complete the work in the second half of 2013. The industry waits with interest.