A Forrester Research report and news leaked about Apple's forthcoming plans for the iPad2 and iPhone5 neatly intersected this week. Apple is apparently, according to Bloomberg, equipping its next-generation devices with near-field communication technology. Forrester, for its part, in a report on mobile trends for 2011 singled out this technology as important to watch.

Mobile will increasingly prompt consumers to interact with their physical environment, Forrester said - a trend that is already manifesting with such technologies as QR codes and mobile augmented reality. This year, however is finally the year that Near Field Communication (NFC) begins to matter, it said. "The market will finally move away from the trial stage in regions where NFC infrastructure is in place."

NFC is a short-range high frequency wireless communication technology that allows the exchange of data between devices over about 3.9 inches in distance.

Be prepared for ongoing challenges to its deployment, though, Forrester warned: "With the traditional hype around technologies that will emerge in 2011, such as 4G networks like LTE, Near Field Communication, bar codes, and augmented reality, figuring out the real business opportunities" can be difficult.

Forrester believes that the mobile/social/local "combo" will drive lots of innovation and growing consumer adoption but not real revenues, at least not yet. Rather, the focus for companies willing to tap into the growing mobile opportunities should be on moving from experimentation to the creation of a mobile business case and strategy, while recognizing that the challenges associated with fragmentation will persist, it concluded.

Low Hanging Fruit

The low-hanging fruit for real business opportunities is payment, as Apple - as well as Google - appears to have concluded. The reason it is adding NFC to its next round of devices is in order to offer users payment capabilities for wireless transactions. Among the capabilities, the device would be able to tap into user information Apple has on file, including credit-card numbers, iTunes gift card balances and bank data.

Google has also launched a similar initiative, although according to reports it doesn’t appear to be as far along as Apple is. The Nexus S smartphone‘s release has the necessary OS and the hardware, and now it is looking to build the NFC infrastructure as well, Fortune reported in early January 2011. Other news reports say that Google is also building out an NFC payment system.

Other Use Cases

However, there are other use cases that marketers would be advised to at least consider. Also at the beginning of January, the first NFC apps made an appearance in the Android Market, weeks after the NFC-enabled 'Gingerbread' version of the mobile operating system made its debut, Near Field Communications World reported. A look at their functionality is instructive:

• Taglet, is a Japanese language NFC tag reader and information sharing app that is able to bypass Gingerbread's read-only limitation by allowing the user to associate data with an existing tag and hold it in an online database, Near Field Communications World explained. When that tag is subsequently read, Taglet retrieves the stored action, say a URL, Twitter handle or other data, from the cloud and acts on it.

• EnableTable, is a US-developed app that lets restaurants issue discount vouchers to customers when they settle their bill in order to drive repeat business. More will likely be coming as developers release development kits for the NFC space, it also said.

• Merchant360 subsidiary Mobifyer, introduced an NFC development kit aimed at Android 2.3 Gingerbread users this week.

Big in Japan

The best use cases, for the moment, however can be found offshore. Red Gillen, an analyst with Celent, describes what he saw in Japan in 2010 at a local McDonald’s. The fast food chain is frequently mentioned by payments industry players as a merchant to watch, he wrote, and after a meeting with local executives found that it was using the technology to effectively give itself a sales life - that is, it was using it as a channel to distribute coupons and special offers.

Gillen described how it works: Customers register as members of McDonald’s "Toku" promotional program. On a weekly basis McDonald’s sends program members a mobile e-mail, with a list of coupons and promotions available that week.

Customers then have two choices - they can either use their mobile browser to open mobile coupons, which are shown to McDonald’s cashiers, or if they have already downloaded the McDonald’s app they can download the coupons to their contactless mobile wallet. "Either way, the customer gains the benefit of the coupon. However, with the contactless version, there is a special advantage. Namely, McDonald’s is able to close the loop between coupon distribution and redemption. By associating redemption patterns with a customer’s "Toku" membership ID number, McDonald’s begins to develop intelligence about that customer’s preferences. Based on this, McDonald’s is able to configure and send out highly personalized promotions - by menu item, specific restaurant, time of day/week, etc. - to the customer’s mobile phone, which the customer is more likely to redeem."

This increasingly tightening marketing loop cannot be achieved with plastic membership cards, he noted - nor with mobile browser-based coupons.