NFC – Features and Future of Banking in India

September 05, 2015

There was a time when people had to exchange things for the things they needed. We then moved to currency money, which became easier to manage and store when banks came into the picture. Then we had the glossy plastic credit and debit cards of course, which made our lives smooth as butter. Now, there is a new wave of innovation in the financial services industry. Near Field Communication technology (NFC) aims to make banking futuristic. Imagine walking in to a convenience store and paying for stuff in seconds by tapping your phone on the counter. Or better yet, paying with your wristband or watch. What we are describing to you is a future where the wallet, paper ticket, loyalty card, purse and credit and debit card have all gone digital.

What exactly is NFC? It is a short-range, wireless link based on radio-frequency identification technology (RFIT) that has the ability to transfer small amounts of data between two devices held close to each other. The SIM card in a phone acts a smart card that identifies your account to a network. On NFC phones, the SIM card acts a Secure Element that can hold other apps such as payment cards. For banking, NFC identifies an individual and his/her bank account information to a computer device.

NFC is something that we actually see all around us. Think access cards for hotel rooms and offices, metro train cards, car keys, e-tickets printout machines, etc. Most global mobile phones have NFC capabilities that can be used for various financial transactions.

The advantages that NFC transactions offer are galore. For starters, there is no need to hunt for that loose change. No need to count. No need to stand in those dreadful queues for hours. Minimum/no transaction errors. The money is protected even when you lose your phone. To enable NFC transactions through your phone, you simply need to have a phone with an NFC chip and then have to download an app (like Google Wallet or Apple Pay) that connects with your bank account/credit card or debit card or a prepaid account that you have connected to.

Let’s do some number crunching now. According to a report in Forbes magazine, the adoption of NFC in smartphones has gained significant momentum, with more than 550 million handsets expected to include the technology by 2016. And according to Juniper research, $180 billion worth of goods and services worldwide will be paid for using NFC in about three years. If we take another country specific example, in Australia, contactless NFC payments in the country have increased from being 18% of all scheme debit card transactions at the start of 2013 to 60% in the last one year, according to an article in zdnet.com. Wearable technology devices likes fitness bands, watches etc. are already on their way to become touch and pay devices. Current examples being the Apple Watch and Optelio Contactless MiniTag which tied up with the Spanish bank CaixaBank for the launch of contactless EMV payment wristbands. As the NFC functions continue to evolve, it can hopefully soon be integrated to eCommerce applications within the home. What it means for the future of banking? Like we said earlier, retail banking has never been better. From having to go to brick and mortar bank outlets to having plastic cards in our pockets to banking through the digital medium, we have already come a long way. Further contactless payment systems such as an NFC mobile wallet is only going to boost the convenience further. This will lead to even better security and analysis of our personal finances, in addition to the ease of just carrying our cellphone to market to shop or transact.

ICICI Bank has been the pioneer in adopting cutting edge technology to drive convenience to its customers. In order to make all canteen transactions cashless, ICICI Bank has launched NFC based payments for its employees. Popularly known as Campus Payment Solution, the idea behind the product is to give a cashless and convenient Tap n Pay experience to employees. Over the Counter payments can be made by just tapping the phone, with an NFC tag, on a Point of Sale machine. The launch has been successful with more than 7500 employees using this payment option for their day to day payments within the campus. ICICI Bank plans to soon roll out this unique and effective payment solution for the masses.

The future clearly looks bright. NFC has been enabled on the Android for quite some time now. And the recently launched Apple Pay has heavily revived interests in NFC banking transactions. It’s already been argued that with the new launch and the increased awareness around NFC will finally bring banking into an ultramodern stage. So, as more and more smartphones add NFC and more developers create innovative apps to use it, the possibilities are truly endless!

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