Google’s Android Shipments Among Hopeful Signs for NFC

Google Inc.’s disclosure last week that 1 million Android-powered devices are now shipping each week with near-field communication (NFC) capability has renewed industry speculation about when NFC-based mobile payments will become a mainstream service. The shipment figure, a rare disclosure from the tightlipped Web search giant, came with weekly activation numbers that indicate that almost 15% of device shipments are now equipped with NFC, a contactless technology that among other things facilitates point-of-sale payments via handsets.

The latest figures from Google indicate NFC is “absolutely in the process of becoming mainstream,” Rick Oglesby, a senior analyst at Boston-based Aite Group LLC who follows mobile payments tells Digital Transactions News. “We’re making a big move toward standardized NFC.”

NFC’s fortunes lately have seemed tied to those of its biggest sponsor so far, Google. Since the company announced its NFC-based mobile wallet service a year ago, the product has struggled to gain merchant acceptance and has been shunned by all major U.S. mobile carriers except Sprint, which is said to be developing a competing wallet of its own. Earlier, NFC suffered from ongoing disputes between banks and carriers over revenue sharing and other issues.

But one other problem holding the technology back—a paucity of NFC-enabled handsets—may now be on its way to being solved. Besides the Google shipment figures, which were revealed at a developers’ conference in San Francisco, the research firm Berg Insight projects some 100 million NFC-equipped devices will be sold this year, up from 30 million in 2011.

Those numbers may not account for the possibility that Apple Inc. will add NFC to the next version of the iPhone, which is set to debut in the fall. Rumors have recently surfaced to that effect, but remain rumors in the face of Apple’s stony silence on the matter. Apple last month introduced a digital wallet called Passbook, lending some credence to the notion that it might be expecting to put NFC chips in its next iPhone.

During its developers’ conference last week, Google also unveiled two new NFC-enabled devices, a tablet called Nexus 7 and a media-streaming device called Nexus Q.

Other developments may also prove propitious for NFC, though more so overseas than in the U.S. MasterCard Inc. on Monday said it will work with Deutsche Telekom to introduce the card network’s NFC-based wallet in Europe, starting with a deployment in Poland later in the year. Deutsche Telekom is also reportedly talking to Google about bringing its wallet to Europe, as well. And Orange, the major French carrier, said last week it has deployed SIM-based NFC throughout the country, the first national rollout of NFC using the SIM card, the carrier-controlled chip that identifies the mobile device to the mobile network, as the so-called secure element housing sensitive payment credentials.

Still, some observers question whether existing payments networks can efficiently switch the volumes of data related to offers and loyalty that are expected to flow from NFC transactions along with payments information. Google’s system, for example, is designed to transmit transaction data and receive coupons and discounts in response, an arrangement that could result in huge volumes when scaled up. Experts like Aite’s Oglesby have argued new networks will need to be built to realize NFC’s full potential.