Android’s Popularity Could Boost New NFC Smart Phone Software

The rocketing popularity of Google Inc.’s Android operating system for smart phones could also propel near-field communication (NFC) technology for mobile financial services now that NXP Semiconductor and Giesecke & Devrient have introduced NFC software for Android phones. The open-source code, announced this week at a major telecom conference in Barcelona, represents the first product allowing smart phones to read and write to NFC tags, conduct phone-to-phone data swapping, and run payment and payment-related transactions, according to Henri Ardevol, vice president and general manager for secure transactions at NXP.

The significance of the new software lies in the rapid rise of the Android OS for smart phones. From a 4% U.S. adoption rate in July 2009, Android had leapfrogged to a 27% share by the end of 2010, according to Javelin Strategy & Research, a Pleasanton, Calif.-based firm that follows the payments market.  At the same time, by the end of November, some 61.5 million U.S. consumers owned a smart phone, according to Chicago-based researcher comScore Inc. By tying their software to Android, NXP and G&D figure that NFC-capable devices will skyrocket, reaching 70 million phones this year worldwide, up from a few million at the end of 2010.

With NFC capability, Android phones will be capable of a broad range of interactions, including coupons and ticketing, even if the acceptance infrastructure for NFC payments in the U.S. remains sparse. By creating their software with open-source code, NXP and G&D hope to encourage software developers to create applications. “It’s a bold move,” says Ardevol. “We put all the software we had in open source. That’s quite an unusual move for a semiconductor company.” But the move, he adds, could have a big payoff. “We’re starting to see a lot of innovation,” he says. “We’re pretty stoked about this.”

Todd Ablowitz, a Centennial, Colo.-based consultant who follows mobile payments, says the new software could lend impetus to NFC, a technology that has suffered from business disputes between banks and carriers and a paucity of handsets incorporating NFC chips.  “This …is another very important milestone towards mass adoption,” he says in an e-mail message. “Think of it this way… the harder it is and the more development is needed to get an NFC chip to integrate into the day to day operations of the world’s stakeholders (carriers, issuers, card brands, etc), the longer it will be until the market takes off.”

The software comes from one company, NXP, that helped invent NFC early in the last decade (when it was known as Philips Semiconductor) and provides NFC chipsets. G&D, a smart card manufacturer, also makes SIM cards for mobile phones. The newly announced software includes an application programming interface (API) allowing the NFC chipset to communicate with the SIM card, which some mobile carriers prefer to use as the so-called secure element housing virtual payment cards and other media.

That interaction with the secure element, says Ardevol, enables what the industry calls card emulation, the function that allows users to make contactless payments by waving or tapping their phones on or near an NFC reader.

Ardevol says versions for BlackBerry and iPhone will be introduced “in due course.” Starting with Android, he says, not a hard decision to make. “When you look at the success of Android, enbabling on that platform was essential,” he says.