Sprint Nextel (NYSE:S)
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Sprint Nextel Corp. (S) took an early lead this week on rivals AT&T Inc. (T) and Verizon Wireless at the Consumer Electronics Show in Las Vegas, tripling the number of smartphones it will offer enabled with a seldom-used technology for tap-and-go payments.
Sprint is betting the LG Electronics Co. (066570.SE) Viper and Samsung Electronics Co. (005930.SE, SSNHY) Galaxy Nexus will help usher mobile payments into the mainstream. In an attempt to speed adoption, the carrier and others also are touting side benefits of the technology, known as near-field communication, or NFC.
"If you're really going to get consumer adoption, you have to start talking about the capability in terms they can relate to: touching the phone to something and having something happen," said Kevin McGinnis, Sprint's vice president of product. "There's a very broad range of applications for NFC."
NFC devices hold the promise of instant coupons as well as new transaction fees; however, the carriers and devicemakers have been buffeted by a tepid response from retailers, who are loathe to buy new equipment to enable tap-and-go payments, and by a debate over who controls consumers' financial data.
In addition, consumers have proven reluctant to ditch traditional credit cards, which reward them with airline miles and incentives.
There's little doubt, though, about the potential for the technology. At its booth at the electronics show, Verizon Wireless was demonstrating how a Galaxy Nexus could be used to release a deadbolt by waving it in front of the lock. Meanwhile, Research In Motion Ltd. (RIMM) demonstrated how drivers can sync their devices to a car's software using NFC, which can enable hands-free calling and other preferences such as seat- and mirror-positioning.
"We simply use the NFC technology to allow the phone to be your mobile key chain, to replace the various keys you would carry and the identification cards you use to get into your office," said Karl Weintz, mobile access vice president for HID Global, whose technology Verizon used in its demonstration.
Soon, consumers using NFC may be able to wave their handsets at arena turnstiles in place of tickets, pair their devices with appliances and mobile accessories, or retrieve coupons or link instantly to web sites by waving them in front of a reader, said Kevin Packingham, Samsung senior vice president of product innovation.
"The challenge is you've got to get the infrastructure built and the people out there to use it before it makes sense," said Charles Golvin, analyst with research firm Forrester. "People aren't going to rush out to buy a device with this capability that they can't use anywhere."
Indeed, there are just 100,000 NFC readers in the U.S., said Yankee Group analyst Nick Holland. That compares with near-ubiquity for traditional credit card readers.
AT&T, Verizon Wireless and T-Mobile USA in 2010 formed a joint venture known as Isis to roll out a mobile payment network that will one day funnel transaction fees back to the carriers. But Isis will only begin trials this year, and AT&T and T-Mobile haven't begun selling smartphones--other than BlackBerrys--with NFC capability.
There's big money at stake in the future of NFC. Google Inc. (GOOG) said it relented to Verizon Wireless's demand in December that its Google Wallet mobile payment software not be imbedded in the Galaxy Nexus, just as the device was set to launch. Verizon has said the software was incompatible with the network and the dispute was not about its Isis venture.
Central to the rollout of NFC technology is who will pay for the terminals to enable payment and who among card companies, banks and the carriers controls users' financial data. Marc Freed-Finnegan, senior product manager for Google Wallet acknowledged those issues were slowing adoption and said it may be years before it is all settled.
Shadman Zafar, a chief technology officer for Verizon Wireless, said he expected it to be at least three years before NFC use for payment is anything more than a niche.
Zafar said retailers are concerned their transaction fees may rise, though he said they ultimately would benefit through targeted couponing and speedier check-out. Under one scenario, a venture like Isis could absorb those fees in exchange for profit-sharing through the coupons, he said.
Nonetheless, more device makers will be compelled to offer handsets with NFC chips in them, Nokia Corp. (NOK) Chief Executive Stephen Elop said during a presentation at the Las Vegas show. "It's something that I personally believe in."
Motorola Mobility Holdings Inc. (MMI) will also enter the NFC fray this year with several handsets, Christy Wyatt, senior vice president of mobile devices for enterprise, said in an interview at CES. "Customers are asking for it and we've got to deliver for them," she said. "The ecosystem will follow."
-By Greg Bensinger, Dow Jones Newswires; 212-416-4676; firstname.lastname@example.org