Ever heard of Near-Field Communications?
Don’t worry if you haven’t because I’m going to bring you the full story on why this technology is important – and why it’s poised to spread like wildfire over the coming months.
Better known as NFC technology, it does exactly what it suggests – that is, allowing two communications systems to interact without physically touching.
For example, if you use a credit card, chances are you’ve used the technology already. Visa (NYSE: V) and MasterCard (NYSE: MA) added such functionality to their cards years ago, which means that instead of swiping your card when you make a purchase, you simply wave it near the card reader to make the payment.
So if NFC technology has been around for years, why is there such a buzz about it now?
Google’s Acquisitions Are a Statement of Intent in the NFC Market
Simply put, NFC’s contactless payment system is now going mobile.
That means you’ll be able to use your smartphone as a secure, virtual credit card, eliminating the need to carry a wallet altogether. And not only is this technology pretty darn convenient for consumers, it also opens the profit floodgates for investors.
As I mentioned in my March 11 column: “Mobile payments in the United States alone could reach $56.7 billion in 2015, up from $5.2 billion in 2009. And Gartner predicts that the number of people using phones for purchases will reach more than 190 million in 2012.”
And it’s no surprise to see Google (Nasdaq: GOOG) front and center of the drive to add mobile payment capabilities to its Android smartphones. That’s why it acquired mobile payments company, Zetawire in December 2010. Zetawire’s crucial asset is its software patent, which supports real-time mobile payments.
It was a busy month for Google, as it officially joined forces with NXP Semiconductors (Nasdaq: NXPI), too. NXP manufactures the chips that allow NFC capabilities in smartphones. In fact, Google’s Nexus S smartphone already has NXP’s chip built in.
As you can see, Google has signaled its intent to spearhead the NFC market. And it’s not done yet, either…
Google’s NFC Blitz Will Launch This Technology into the Mainstream
Recent “unofficial” reports suggest that Google is about to embark on an all-out NFC blitz over the next four months.
Specifically, the firm plans to jumpstart NFC adoption by running live tests in thousands of stores in New York and San Francisco. And Google would equip the stores with registers that accept NFC payments from smartphones.
Will it prove successful?
Well, this is Google – and like anything that the company throws its weight behind, I’m convinced that the tests will showcase the power of this technology – and Google’s reputation. In turn, this would lead to more Android phones coming preinstalled with an NFC chip in the future.
And with Google commanding the biggest share of the smartphone market, it’s in the best position to drive this technology forward. As Bloomberg puts it, “The adoption of NFC payment systems will hinge on the availability of phones with the technology.”
So how do we recommend playing the coming barrage of NFC phones?
Your best bet is to go with the NFC chipmakers like NXP Semiconductors. By investing in the source of NFC technology, you can capitalize on the uptick in mobile payments and the relentless growth in smartphone sales at the same time.
Editor’s Note: My colleague, Matthew Weinschenk, spotted this “contactless payment” trend back in January. He discovered a little-known company that incorporates a type of NFC technology in its transit payment system. You can check out all the details of his recommendation by signing up for a trial subscription to The White Cap Report here.