Near Field Communications (NFC) technology remains a foggy subject in retail. Not that an understanding of how NFC will change customer dynamics in other industries is any better. But, from time to time, we hear NFC rear its head and wonder, "Is there anything in NFC that I am missing?" To begin with, there are two aspects of NFC we need to understand: how widespread the technology is and where we are on the adoption curve and how NFC can improve the retail experience. The answers to those questions decide how much focus we need to bring to NFC in retail scenarios.
The undeniable truth is that NFC is a sexy technology. You tap two NFC equipped devices and pictures, video, documents, contacts, apps and money can get transferred from one to the other. If you are a customer, you think, "It can't get better than this!" If you are a retailer, think smartphone to POS here and the retail scenario is set up.
While the technology is simple and intuitive, a Berg Insight study showed that there were only 40 NFC-enabled mobile handsets released by end of 2011[i]. That number has since grown substantially. By March 2012 there were 100 NFC enabled models. Forecasts by ABI Research indicate that 102 million NFC enabled handsets would have been shipped in 2012. By 2013 that figure will reach 285 million and by 2017 it will hit a staggering 1.95 bn. Of course, NFC enabled tablets will have contributed their might to the numbers by 2017[ii]. Although NFC growth figures went through a minor hiccup at the end of 2012, thanks to the iPhone 5 omitting the chipset, it's quite apparent that before we know it, NFC would have infiltrated retail. And now is the time to take note of what NFC is capable of, place your retail fingers in warm NFC waters and test it out.
It is possible to estimate the vast impact of NFC on retail by simply tracking the numbers: Jupiter cut back its forecast for NFC-related transactions from $180 bn in 2017 to $110 bn after news of the iPhone 5 having omitted NFC. Can a single handset which will, incidentally, get outdated in the next 18 to 24 months have a $70 billion impact on retail? While we ponder over that, financial services experts have noted that these developments may not really hinder NFC growth over the long term. Frost & Sullivan forecasts that NFC will account for 42.3% of all mobile payments in Europe by 2015[iii].
The sloping numbers around NFC – up, as well as down -- do get confusing. The primary reason for the rollercoaster assessments in NFC is the singular focus around contactless transactions. However, there is much more to NFC in retail than transactions. For example, NFC can increase customer engagement, improve customer loyalty, and result in transactions that do not necessarily mean using a mobile NFC-related payment route (like Google Wallet, MasterCard's PayPass, and PayPal's InStore).
One of the simpler ways in which retail can leverage NFC is to use it to improve customer loyalty, using NFC to identify customers when they walk into a store. The customer taps the NFC phone at the entrance – a sort of NFC check-in - and the store knows exactly who has walked in and can use that information to tailor the in-store experience (using other sources of data). The retail industry does have a well-established and full-functional way to manage loyalty – but it is invariably post purchase: a customer makes a purchase and gets loyalty points and a more customized experience in return (the store discovers the customer's presence only at the time of check out!). However, the big difference in using NFC is that in store experience can be personalized without a purchase being made.
There are other NFC-based loyalty related applications that point to the way retail will leverage the technology. Early this year, Orange in the UK launched a loyalty points redemption program that uses NFC. Subscribers can simply tap their NFC-enabled phones on posters with NFC tags to redeem treats at a restaurant chain. At about the same time, Swedish retailer ICA To Go launched its NFC-based program giving customers an NFC-delivered loyalty stamp for each lunch they bought rather than stamp a paper card.
The case studies narrate an undeniable story: in the short term, NFC in retail will be driven by loyalty and marketing, not by transactions. We forecast an explosion of NFC activation in retail through 2013. To learn more or to experience Wipro's NFC solutions, visit us at the 102ndAnnual NRF Convention & Expo, January 13-15, 2013 in booth #1941.
