What will the NFC Forum’s new 5-year technology roadmap mean for Near Field Communication (NFC) adoption across consumer, enterprise, and NFC tag use cases?
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NFC Forum Unveils NFC's New 5-Year Technology Roadmap
Earlier this year, the major standards body for Near Field Communication (NFC) technology, the NFC Forum, unveiled its latest roadmap for the technology. The new roadmap is the result of a collaborative effort from some of the 400 member companies of the NFC Forum, including leading members such as Apple, Huawei, Google, Identiv, NXP, Qualcomm, Sony, and STMicroelectronics, among others. In essence, this roadmap seeks to bring a number of enhancements to NFC technology, enabling new opportunities and incentives to embed the technology, improving performance and reliability, enhancing the user experience, adding new functionality, and bringing sustainability to the forefront of NFC’s message. These multi-faceted enhancements have the potential to compound the benefits of integrating NFC within a product, beyond payment applications, and could enable many new scalable opportunities for NFC technology over the next decade.
New Features, Improved User Experiences, and the Path to Sustainable Products
The NFC Forum identified five main targeted innovations to be delivered over the next 2 to 5 years:
- Increasing the Wireless Charging Capabilities from 1 Watt (W) to 3 W: The intention is to enable embedding new form factors and device types with NFC technology that can be charged wirelessly when placed on top of a smartphone. This will include size-constrained devices that cannot incorporate alternative Qi charging technology, such as true-wireless earbuds, styluses, and small form factor wearable such as rings and bracelets, among others. Improving the charging speed will help provide a better user experience thanks to faster charging, while the ability to charge wirelessly could incentivize some users to adopt an NFC-enabled product versus one without.
- Increasing the Range by 4X to 6X from the Current Maximum of 5 Centimeters (cm): While one of the major drawbacks of NFC technology, particularly for security, is its limited range, slightly increasing the range may improve the overall user experience. As devices begin to connect earlier, users wouldn’t need to be as precise when tapping, resulting in a swifter and more reliable overall user experience. This may be particularly vital in areas such as access control, contactless ticketing, and reading NFC tags embedded within a variety of consumer products.
- Expanding the Capabilities of a Single Tap to Support Several Actions, such as Receipt Delivery or Loyalty Card Recognition: While this use case is still in the ideation phase, the intention is to enable a single tap from an NFC-enabled smartphone to be responsible for multiple actions. For example, when making a contactless payment, a user could also receive a digital receipt or add points to a loyalty card in the digital wallet, among other potential benefits such as automatically applying taxes and concessions when buying a ticket. Feasibly, this could also be expanded to ownership use cases; for example, transferring payment and ownership of a digital item such as an event ticket to another user.
- Enabling Smartphones to Become Point-of-Sale (POS) Terminals to Allow Users to Receive Payments Anywhere: This use case, also known as SoftPOS, has already been deployed by Apple via its “Tap to Pay on iPhone” capability. This enables merchants to receive payments directly to their iPhone from another Apple Pay-enabled device, alongside contactless credit and debit cards. Similar solutions are also available on Android phones. The intention is to improve the reliability of the user experience and potentially provide on-screen guidance to help users easily find the tap location on the phone for a more consistent experience.
- Enabling NFC to Share Data Formats Needed to Improve Sustainability, such as How and Where to Recycle a Product, Regulatory Requirements, and Information on the Product Composition: As sustainability becomes an increasingly important factor in consumer purchase decisions and regional regulations, embedding NFC in a product to provide information on how a product is made, its sustainability credentials, and how and where it can be recycled could further incentivize the shift toward circular economies. This is also being driven by regulatory incentives within the European Union (EU), which is currently in the process of defining its Digital Product Passport, and seeking to create digital twins for the entire product lifecycle. NFC brings additional incentives compared to alternative technologies such as QR codes or barcodes, including more effective supply chain monitoring, guaranteeing the authenticity of a product, transfer of ownership, and higher security. This could also be combined with consumer engagement platforms already well established in NFC tag products today, while recycling products could be incentivized via loyalty rewards or future discounts.
How Can New NFC Technology Drive New Opportunities?
NFC-enabled devices are currently expected to achieve an 8% Compound Annual Growth Rate (CAGR) between 2023 and 2028, growing from 1.16 billion to nearly 1.7 billion annual unit shipments. Today, smartphones still account for over 70% of the NFC market, despite weakening smartphone demand. Meanwhile, penetration is projected to steadily increase from 65% to 75% of the smartphone market, as contactless payment adoption continues to accelerate. Smartwatches account for the second-largest NFC market, representing around 12% of the market in 2022, and expected to reach 17% of the market by 2027. Some 289 million units are expected to ship at this time due to the growing smartwatch market and almost ubiquitous NFC penetration thanks to payment and mobile wallet applications.
However, additional incentives for NFC adoption in the coming years may accelerate this further. This will include the aforementioned enhanced wireless charging capabilities, the accelerated rollout of digital keys and secure keyless entry combining NFC and other technologies such as Ultra-Wideband (UWB) and Bluetooth® Low Energy (LE), wider rollout of SoftPOS solutions, alongside other consumer facing NFC tag solutions, and the potential emergence of an NFC Digital Product Passport.
For example, with the continued growth of True-Wireless Stereo (TWS) headsets, shipping more than 320 million this year and reaching over 700 million units by 2027, alongside growth in activity trackers, watches, and new wearable form factor like rings, NFC wireless charging has the potential to become a compelling additional feature, integrating NFC technology alongside device pairing and provisioning and payment applications. In addition, ABI Research expects new opportunities for NFC tags embedded within healthcare devices for remote patient monitoring and simplified provisioning and interaction. NFC can enable connectivity in smaller form factors for use cases like logging data, configuring settings, and supply chain monitoring. ABI Research also expects NFC tags to be found within increasing numbers of mainstream consumer and pharmaceutical goods for brand protection and anti-counterfeiting measures, alongside for consumer interaction benefits. More basic tags can be leveraged within food and consumables, while more advanced tags can be used to authenticate luxury items such as clothing.
Finally, continued growth of POS terminals will be due to wider contactless payment rollouts, the emergence of NFC-enabled Electronic Shelf Labels (ESLs), and new opportunities within smart home and smart appliances across NFC reader and tag applications. NFC reader-enabled appliances or power tools can read tags that are embedded in accessories or refill items. Existing applications include smart toothbrushes and replacement toothbrush heads, air purifiers and filter refills, and power tools with multiple attachments. These can provide several benefits, including:
- Protection against counterfeit refills or accessories that may damage the product, cause a safety risk, or reduce the end-user experience and damage the brand.
- Building loyalty mechanisms to incentivize users to buy authentic accessories and create brand loyalty or new purchase and upgrade avenues, as well as provide usage and warranty information.
- Ensure the accessory is being used with the recommended settings and automatically configure the settings on a device without manual input, providing an improved user experience.
- Notify customers when the accessory reaches end of life and needs to be replaced, e.g., toothbrush heads or air filters. This could lead to new business models such as subsidizing the cost of the reader product and guaranteeing that the user is using authentic products as part of a subscription.
- Companies can also gather information on usage patterns, user behavior, and preferences for new product design.
Combined, these efforts have the potential to improve the overall utility and usability of NFC technology, accelerate payment rollouts, encourage further NFC adoption in devices, and open up new market opportunities within wireless charging applications where previous limitations may have prevented adoption.