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Near Field Communications Holds Big Promise for Retailers, But New Headaches for the Contingency Planner

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Have you made a credit card purchase today? If you are like most of us, the answer is probably “yes.” But upcoming changes in technology might make whipping out the plastic as endangered as the hand-written check. Author Leo Wrobel explains how your phone may soon replace your credit card, and with that change will come a whole new area of concern for the contingency planner.
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If there has been one thing about disaster recovery over the past 30 years, it is the fact that any new technology typically outpaces the means to recover that technology by three years or more. Years ago when mainframe computers were king, critical applications and financial data were safely locked up in a “glass house” computer room run by a professional MIS department. At that time, if one could back up the mainframe, the rest of the job was easy. Then along came Local Area Networks (LANS), and for the first time critical data was “out there” on desktops where it could be easily compromised. It is safe to say that a decade or more was spent trying to write new operating and security standards just to plug the vulnerability holes created by LANS.

Just about the time all that was accomplished, along came laptops, PDAs, and other handheld devices. The specter of a CEO dropping his or her PDA in a busy airport and the resultant consequences to the company (from stock manipulation to confidential email addresses being compromised) was the stuff that kept auditors up at night with cold sweats.

Now it’s the wireless phone’s turn. Moreover the “problem” may be personal this time. Rather than just affecting a corporation with a fiduciary responsibility to protect assets, a mishap with these new technologies may also affect you personally.

What Is “Near Field Communications”?

Manufacturers will soon be adding a new technology to the next generations of smartphones. The technology is called Near Field Communications (NFC), facilitated by a NFC chip in the phone, which will allow the person carrying a phone to make purchases in stores by simply swiping the phone over a reader. Sounds very convenient, doesn’t it? It’s a fact that most everyone carries his or her phone with them all the time, don’t they? So what’s the problem?

The first issue is that companies like Apple, AT&T, and Verizon will have direct access to the phone owner’s confidential banking info. They would logically have to in order for this system to work. In this new paradigm, a person’s phone would work the same way as a debit card, and would draw money from a bank account for the purchase. According to some sources, all this is coming along much sooner than we think.

The new Apple iPad is supposed to come out this spring, and NFC might well be one of its features. Make no mistake—the technology is coming. It’s just too irresistible to equipment manufacturers like Apple and AT&T not to roll it out.

First, consider that the technology will belong to companies like Apple, RIM, Nokia, and—by implication—AT&T and Verizon. Banks and credit card companies need not (necessarily) apply. Apple could become the new middleman with transactions going through them instead of say, Chase or Citibank. Apple also might not have to pay processing fees to credit card companies, like it does now when people make iTunes purchases. And what about those pesky, slow-paying wireless phone customers? Collection issues could be a breeze for AT&T and Verizon when payment could be debited right out of the phone, right?

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