Does NFC Lag Behind Its Competitors in Payment Competition?

As the Near Field Communication (NFC) technology, which had been considered as a core technology that will support offline simple payment services, has faced the limit, it has lost the initiative to its competing magnetic technology. 

According to industry sources on June 26, Payco, a mobile payment service operated by NHN Entertainment, has recently changed its form of offline payment from NFC to barcode-based payment methods.

Payco pledged to install 300,000 NFC reader terminal dubbed “Dongle” at its offline member stores when it has started a simple payment service in 2015. However, it has recently decided to install Dongle only in some of its flagship stores and encourage the rest to use barcode-based payment systems.

After experts said the technology would spread in September last year, the card industry had formed a body to establish Korean standards for the NFC technology and continued discussions until recently. It agreed to use the standards set by BC card but it is reluctant to spread the technology, including the installation of additional terminals. An official from the card industry said, “Offline member stores need to pay for the installation of NFC payment terminals. So, it is hard for card companies to ask them to adopt the technology.” The industry expects that Google Android Pay and Apple Pay, which are preparing for NFC-based offline payment services, will also face similar difficulties.

In addition, Samsung Pay, a Samsung Electronics’ simple payment service that uses the magnetic technology, has continuously seen the number of its users to 5 million, raising a question on the forecast that NFC technology will dominate the payment market. Samsung Pay has secured Magnetic Security Transmission (MST) technology, which sends magnetic field signals to smartphones, by acquiring U.S.-based LoopPay in February 2015. Samsung Pay users can use the payment service in any stores that accept credit and debit cards.

One variable that can prevent a magnetic mainstream theory is a new simple payment technology. There are two possible technologies. One is “Hand Pay” service which was introduced by Lotte Card for the first time in the world. It is the service that allows users to pay by way of palm veins and it is now available in some Seven-Eleven stores. The Hand Pay Service works with palm veins and card information registered in advance. When a palm is placed on an exclusive terminal at the time of payment for a few seconds, payment is made through authentication. The other is “App Card BLE,” a Bluetooth-based payment service which has been jointly run by Samsung Card and KIS Information & Communication through the recent memorandum of understanding (MOU). The service doesn’t need a barcode to go through transaction. Instead, it enables users to make payment by carrying their smartphones within 50 to 70 meters from its terminals which is a much wider range than the NFC technology.