Is NFC or cloud the future of mobile payments?

Mobile wallets, which allow payments to be made from a mobile device for goods and services is an expanding market, but it is as yet unclear which form of payment will be the standard for customers; NFC (Near Field Communication) or cloud payments.

There was some disappointment when Apple did not incorporate NFC into the newly released iPhone 5, when other manufacturers are beginning to incorporate NFC into their new handsets. Apple clearly does not see NFC as being important to consumers (yet). Furthermore, the expense of upgrading merchant payment terminals to be compatible with NFC has dissuaded some large retailers from the move.

The other method of mobile payments, is through the cloud via an app on a smartphone – already a much cheaper option than NFC as it does not require additional hardware, ‘plus it fits into existing back-end systems with very little change’.

It can be argued that NFC is slightly more intuitive, as it still requires a physical action to complete the payment, which is what customers in shops are used to. However, as people become more confident with e-commerce, the decoupling of location to payment – even within retail stores – may mean customers feel confident in paying for products on their phone, in the cloud.

It is not clear which direction the market will turn towards, or even if there will be a clear winner in the near future. Whilst there is growing collaboration between banks and mobile carriers in developing NFC payments, this is mirrored by cloud wallet proponents, led by Paypal. It may be that both can compliment each other, depending on the merchant’s preferences, but the key is whether a significant number of retailers and mobile device manufacturers are willing to gamble on implementing NFC – and whether the two different forms of mobile wallet will converge, and what the end result will look like.

Mobile wallets have sometimes been viewed as a ‘solution without a problem’ but as retailers, banks and mobile manufacturers begin to push mobile wallets even more firmly with incentives for consumers, time will tell as to what form of mobile wallets will become part of the retail experience.