Although NFC is great, we still opted for the QR code!

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NFC has always been regarded as a promising technology, but its actual promotion has not been satisfactory. From item identification to mobile payment, it has been defeated by the more "primitive" QR code technology. The joke of using an electric fan to blow away an empty box has become a reality here.

1

NFC Origin

NFC (Near Field Communication) is a short-range high-frequency wireless communication technology that allows electronic devices to exchange data through contactless point-to-point data transmission (within ten centimeters). This technology evolved from contactless radio frequency identification (RFID) and is backward compatible with RFID.

Mobile payment is the main application of NFC. In February last year, Apple Pay, which uses NFC technology, entered the Chinese market with great momentum and attracted 30 million card-bound users on the first day. However, looking at the current market one year later, Apple Pay has no ability to fight back against Alipay and WeChat Pay.

Market share of China’s third-party mobile payment transaction volume in the first half of 2017

Data source: iiMedia Research

According to iMedia Research data, Alipay and WeChat Pay jointly captured more than 90% of the transaction share in the mobile payment market in the first half of 2017. The high market concentration indicates that the mobile payment market has entered a mature stage, and the dual oligopoly market structure of Alipay and WeChat Pay has been initially established.

From the late 1990s to the early 2000s, QR code and NFC technologies were born one after another. Essentially, the birth of both technologies was due to the need for higher-dimensional information transmission, not for payment.

The two-dimensional code widely used in China is the quick response code (QR code) invented by the Japanese Denso company in 1994. The emergence of the two-dimensional code is because the information density of the one-dimensional code can no longer meet commercial needs, so storing information in both horizontal and vertical directions brings about the concept of two dimensions.

As we all know, Denso is an auto parts manufacturer. QR codes were originally designed to facilitate the tracking of parts in auto factories, and have since been widely used in inventory management in various industries.

In 2003, Philips Semiconductors (now NXP) and Sony planned to develop a wireless communication technology compatible with contactless card technology. Philips sent a team to Japan to work with Sony engineers for three months, and finally developed NFC. In 2004, the two giants and former mobile phone giant Nokia jointly established the NFC Forum and began to promote the application of NFC.

NFC technology is derived from contactless radio frequency identification (RFID), and its purpose is to add more interactive functions in addition to reading and writing cards. At the beginning, related products were mainly concentrated in the fields of access control cards, bus gate cards, etc.

In the following years, the two technologies developed steadily without any conflicts, but in the process of technological evolution, they gradually became new means of payment and came into direct contact in the field.

As for the result, everyone has seen it. NFC has developed slowly, and Alipay and WeChat Pay have taken this vacant seat. Together, they have taken over 90% of the mobile payment market.

2

Technical advantages and disadvantages

Technically, NFC is much better than QR code in terms of convenience and security. However, advanced technology does not necessarily win the market.

convenient

After years of user education from Alipay and WeChat Pay, everyone has gotten used to the QR code process and no longer feels that using QR codes is a hassle. Take out your phone, unlock the screen, open the app, click to scan the QR code, aim without shaking your hand, and wait for the beep. Everything is so natural.

With NFC, you only need to touch the card reader, the phone screen will automatically wake up, and you can directly enter the password. It can be completed within 3 seconds. There are many factors that affect the success rate of QR code recognition, such as the distance and angle of the code scan, and the brightness of the light.

In the application of shared bicycles, using a shared bicycle equipped with an NFC smart lock is just like using a mobile phone to swipe the subway. After taking out the mobile phone, no operation is required, just touch the lock position directly, and the bicycle will unlock with a "beep". The whole process no longer requires scanning codes and waiting, no longer requires opening any APP, and even does not require the mobile phone to be connected to the Internet.

Safety

NFC technology is a short-range wireless communication technology that operates at a frequency of 13.56MHz within a distance of 10 cm. It is precisely because the transmission distance of NFC is short and it is a close-range private communication method.

Therefore, from the perspective of security, while maintaining convenience, NFC is obviously more secure and controllable. The security of barcode payment can be guaranteed through technical solutions, but it is still out of the physical contact link and there are still uncontrollable factors.

In addition, NFC technology has two-way authentication and data encryption, which can achieve financial-level security. This is something that cannot be achieved by one-way communication and limited information of QR codes. NFC technically ensures that fraud cannot be carried out.

cost

When it comes to cost, NFC seems to lack confidence. First of all, NFC payment must be supported by mobile phone hardware (equipped with NFC radio frequency antenna, SE security module, etc.), and merchants must also install NFC card swiping equipment , all of which make the deployment cost of NFC high.

In addition, although data shows that nearly 70% of POS acceptance terminals in the country have NFC payment capabilities, due to the existence of a large number of small and medium-sized merchants that lack POS terminals and training, consumers have repeatedly encountered difficulties in using NFC, resulting in a decline in usage rate.

In contrast, all mobile phones have cameras, and the user terminal cost is almost zero. With lower entry and usage thresholds than NFC payment, coupled with the stimulation of red envelope subsidies, QR code payment quickly completed market education and penetration.

On the B side, merchants can selectively install code scanning equipment, and even street vendors can paste QR code payment information printed on A4 paper. If NFC is used, the old man must be equipped with a new POS machine, so the difference in market acceptance is obvious.

In short, NFC has a high initial investment cost, but is easy to use, while code scanning has a low initial investment cost, but is more troublesome to use.

3

Conflict of interest

NFC was used in payment earlier than QR code and has successful experience in developed countries. Before QR code payment became popular, NFC had a chance to occupy the market, but China's national conditions made it difficult to balance the interests of all parties. Everyone had their own ulterior motives and the teammates were not united.

First, the hardware architecture of NFC is relatively complex, divided into Controller and SE. These two devices are not completely from the same supplier. In addition, in some cases, in order to make the antenna smaller, an external Boost is required. The complex architecture has led to a complex ecological chain, and the complex ecological chain involves different industries.

Controller and SE are only hardware aspects, but what functions this NFC supports still needs to be determined by the upper-layer software providers. Even upstream and downstream manufacturers deliberately create incompatible patents and private protocols for profit.

In China, in 2008 , China Mobile and Guangzhou Metro jointly launched the "Mobile Subway Ticket". Even if the mobile phone does not have NFC function, as long as it is replaced with China Mobile's "NFC-SIM card", it can realize the function of bus card.

In 2009, China Mobile officially proposed to fully promote mobile phone near-field payment, but it used the 2.4GHz frequency, which is inconsistent with the 13.56MHz frequency used by the existing public transportation system and financial industry POS terminals, and cannot communicate with each other.

This means that if the 2.4GHz frequency is adopted , public transportation and UnionPay will have to replace basic equipment. UnionPay, which has the strongest policy power backed by the central bank, is obviously unwilling to accommodate China Mobile, not to mention that payment is a financial business and there is a conflict of interest. However, China Mobile has 600 million users and is the absolute overlord of the mobile phone market. Neither side is willing to give in to the other and each side is fighting for itself.

Around 2011, the NFC business of the three major operators reached a dead end, and the 2.4GHz frequency was also eliminated. At the end of 2012, the central bank decided to set the 13.56MHz NFC as the mobile payment standard for the financial industry. Thus, the standard dispute came to an end.

UnionPay seems to be the winner, but due to the lack of enthusiasm of operators, its SIM-SWP solution has not been well promoted. Since 2013, mobile phone manufacturers have adopted fully built-in NFC solutions, but they still cannot overcome the complexity of the industrial chain. Looking at the various stakeholders in the chain, it is still difficult to achieve a win-win situation towards a common goal.

NFC payment applications in China

In contrast, the QR code support system cannot even be called an industrial chain, because the entire chain is monopolized by Internet companies themselves, which have a high degree of control over the entire system and can fully cope with market competition.

In 2011, smartphones became widely popular, and the pixel of mobile phone cameras had reached the accuracy of recognizing QR codes. Alipay launched QR code payment in that year. Although it was once stopped by the central bank due to security issues, in September 2014, Alipay and WeChat launched QR code payment again.

With the crazy O2O subsidy war, users quickly developed the habit of using QR code payment. At this time, it is hard to imagine how difficult it would be for NFC to overturn the already perfect QR code system. It is no surprise that the powerful Apple Pay was defeated.

Conclusion

Some people believe that if a technical solution fails to gain popularity after ten years, it is basically outdated. Indeed, NFC has not yet established an application that has established its status in the industry, but it has not been forgotten. For example, shared bicycles, which have already mastered the use of QR codes, have launched NFC locks one after another.

Industry insider Baman believes that the essence of NFC technology is a technical collaborator, not a disruptor. We position it to help other technologies and products improve, rather than to kill anyone. Only with this positioning will it have a good future.

Exclusive compilation of Global Internet of Things Observation

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