Beijing Metro Offers Swipe to Ride: Is NFC Going Mainstream ?

Beijing Metro announced a partnership with the Beijing Municipal Administration Traffic Card to launch mobile swipe-to-ride service on June 26. The first phase will will see NFC subway payment available on the subway’s Fangshan Line. Some 160 NFC-capable mobile phones by brands such as Xiaomi, Huawei, Samsung, Nubia, OnePlus and Meizu will support the new service.

NFC technology has been available in some phones since 2006, when Nokia produced the first model and conducted several tests on public transportation. Over the past decade, proponents of NFC have hoped the technology might reach the same popularity as Bluetooth and Wi-Fi. But NFC adoption remains slow, and in some way it is merely a “window-drewssing” for premium phones.

Yahui Lin, an analyst at WitsView Technology Corporation, an LCD market research firm, told 21st Century Business Herald that NFC chips gradually moved into the Android smartphones and tablets, and then iOS devices such as the iPhone and iPad. This is the normal industrial development process, he said. NFC never exactly stagnated. Beijing Subway’s initiative to support NFC mobile phone ticketing would be a major push for NFC technology in practical usage. I could also help phone users to cultivate habit of paying with NFC.

Slow to Take Off

NFC, or near-field communication, was created in 2002 by Philips and Sony. It was an outgrowth of other radio frequency identification technology that enabled information to be exchanged over a short distance.

But there was never a “killer app” that brought NFC into practical everyday use. Public transit was one of the most promising proofs of concept. However, due to varying mobile handset models, user habits and other factors, NFC ticketing never caught on, on the rail lines linking Shanghai, Nanjing, Wuxi and Wuhan. Beijing Subway said the total times NFC payment was used from 2013 to date was “nearly a million.”

Most NFC chips chips used in smartphones are developed by NXP. The company’s China president Zheng Li told 21st Century Business Herald that NFC promotion requires a heavy investment in usage. It’s crucial to have one or two strong application companies in the supply chain to push promotion along. He said Apple Pay’s entrance to China in 2016 played a significant role in getting banks on board with NFC payment.

In fact, in the realm of mobile payment, the rate of NFC adoption remains far lower than other third-party payment solutions. Lin said public transportation payment is the fastest expanding use scenario for NFC payment because it is the best developed. The trend is moving toward card-free systems, he said. However, the popularity of mobile payment is highly dependent on application scale. NFC payment systems require both online and offline coordination. Before NFC-compatiple POS terminals became widely available, most off-line mobile payment had to be resolved through QR codes.

“Apple Pay and Samsung Pay may have found support in international use, but in China NFC use will have to begin with public transportation. We need to start training users to have the habit of paying with NFC, and this will expand gradually to more offline payment scenarios,” Lin said.

Another point is that the hardware architecture of NFC is complex. The NFC core hardware module is composed of a controller and security module, and the two components are not always from the same supplier. In addition, in some scenarios a booster is needed to make the antenna module powerful enough to complete an exchange. Complex architectures require complex ecological chains, and the complexity of these chains bleeds into relevant industries, starting from the carriers. In the process of supply chain consolidation and interest distribution, the complexity results in several holes through which market opportunities escape.

Far from the Mainstream?

The highly mature mobile industry is slipping into a period of stagnation. As growth hits its ceiling, the industry is hungry for new technology. Today, it’s downstream manufacturers’ demands that have released positive signals for semiconductor manufacturers, Zheng said.

NFC used to be a standard feature in all high-end cell phones. Samsung launched its NFC functionality with the Galaxy S3 and carried the technology through its Galaxy S series. Apple also started supporting NFC in the 2014 launch of the iPhone6. A review of Chinese phones released in the first two quarters of 2017 showed a pattern: high-end products such as Huawei P10, Xiaomi 6 and One Plus 5 all supported NFC, while all lower-priced handsets, like the Gionee S10, Huawei Nova2 and OPPO R11, have yet to add NFC support.

According to Beijing Municipal Administration Traffic Card, nearly 160 mobile phone brands including Xiaomei, Huawei, Samsung, Nubia, One Plus and Meizu support its mobile scan-to-ride project. As Apple has not added NFC for public transportation support, iPhone users cannot currently use the mobile transit card.

At the Worldwide Developers Conference this month, Apple announced NFC functionality and NDEF data readability will be enhanced in the iOS 11 system. It would also add point-to-point payment support for Apple Pay, and Apple Watch devices with WatchOS 4 will also support NFC payment.

The future iPhone should replace NFC based cards and transit cards.

According to Trend Force Topology Research Institute (TRI), based on the current speed at which mobile brands and manufacturers launch NFC compatible smart phones, 60 percent of all phone products should have NFC function in 2017. With enhanced usability and safety features, NFC may have a real chance at breaking into consumer payment habits.

In addition to mobile payment, NFC technology can also be used for identification, electronic business card exchange, event registration, transferring files and downloading music. These service use NFC’s point-to-point, card simulation and card reader modes.

How far is NFC from becoming mainstream? Lin said the standardization of NFC technology, its adoption in the environment, user habits and regulations are all factors that must be considered. The technologies MIFARE verification, Felica TypeB and ISO15693 must be interoperable. Also, mobile payments, international payments, public transportation cards and ID validators still need time to mature.

This story originally appeared in 21st Century Business Herald and was translated by Pandaily.