NFC’s Future: Cost Vs. Security

Will NFC’s cost barrier prevent it from becoming a significant player in mobile payments’ future, or will its security and flexibility improve its adoption? That’s just one question tackled in the FRB’s new report, “Mobile Phone Technology: Smarter Than We Thought.” spoke with one of the report’s authors, Marianne Crowe, vice president of payment strategies group at the Federal Reserve Bank of Boston, about cloud’s role in secure payments, QR codes, card-not-present fraud, and more.

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NFC’s Future: Cost Vs. Security

It’s tough to take a stance on the future of mobile payments if you don’t know how the technologies behind the processes work.

If you read the Federal Reserve Bank of Boston’s latest report, Mobile Phone Technology: ‘Smarter Than We Thought,’ that won’t be a problem. spoke with Marianne Crowe, the report’s co-author and vice president of payments strategies group at the Federal Reserve Bank of Boston, to discuss the report’s findings and gain insight as to where mPayments is headed from here.

Crowe’s FRB report covers many aspects of mobile payments. She highlights differences in secure elements, outlines cloud-based payments structures, and explores the impacts that card-not-present fraud could have on the industry moving forwards. But among the most useful aspects of the report is its breakdown of NFC technology, and contactless’ biggest strengths and weaknesses.

According to Crowe, NFC’s biggest cause for optimism is the security and flexibility it offers through its secure element.

She said: “If you think of the secure element as the wallet in the phone, it’s this safe place that can put all of this payments information for, convenience and efficiency, for the consumer to then choose from to make a payment, just like they choose from their wallet. It’s a real wallet because it’s self-contained and it’s secure. “

NFC’s biggest disadvantage, according to Crowe, is one we’ve heard time and time again: cost.

“It requires the merchants to make a big investment in all of their terminals to put NFC technology in there. And then the handset manufacturers working with the mobile carriers have to enable the phone at the same time, in order to get enough traction on the business side and traction on the consumer side, to actually have both together to be able to make payments at the point of sale through NFC,” Crowe noted. “And that has taken longer than expected because the merchants have been and still are somewhat reluctant to implement NFC technology.”

When asked if she personally believed NFC would be the mobile payments “technology of the future,” Crowe gave a positive answer, albeit one with some caveats. Crowe pointed out that adoption can be slow with new technologies because that don’t make old technologies obsolete, as people who are comfortable and familiar with older methods have less of an impetus to change. She also noted the complexities involved in bringing all “stakeholders” together.

Still, despite the technology’s modest adoption to this point, Crowe remained optimistic about NFC’s future.

“I don’t think it’s going to be the only mobile technology of the future, but I still think it will be one of the leading technologies, not only in the United States but in other developed countries as well,” Crowe said. “There’s already been a lot of investment in this platform from card networks, from carriers and others, and so even though it’s been moving more slowly than many in the industry had hoped for, I think … it has a chance to really survive going forward.”

To hear more Crowe on NFC technology, secure elements and the relationship between mobile payments and card-not-present fraud, listen to the full podcast below.


*If you have trouble with the audio player above, click here.

Marianne Crowe
Vice President, Treasury and Financial Services
Federal Reserve Bank of Boston

Crowe serves as the Mobile Payments Project manager and payments liaison to the Consumer Payments Research Center. Her previous roles at the Boston Fed include vice president/project manager in the Consumer Payments Research Center, assistant vice president of business development, the National Image Archive service, and the Boston check operations. Prior to joining the Fed in 2000, Crowe worked at BankBoston in project and operations management positions. Crowe has been a member of the FSTC mobile payments workgroup and the NACHA Internet Council.

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