Key to Mobile Payments Is Near Field Communications Technology - What Companies Are Positioned to Move Forward?

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John Eastman submits:

Perhaps cash is on its way out, in which case, paying for groceries or goods at your local store will never be the same. Imagine your salesperson at the department store, waiter at your favorite restaurant, or clerk at the grocery asking you the above question at check out. You won't have to imagine for much longer as technology via near field communications ((NCF)) is coming to a store near you. NCF technology is intended mainly for use in mobile phones, though there are several specific uses at present. One is card emulation in which the NFC device mimics an existing contact-less card. There is also a reader mode. In which the NFC device is active and reads a Radio Frequency Identification Device. This is now used in applications such interactive advertising . In addition, two NCF devices can communicate directly with each other and actually exchange information, in what is called P2P mode.

The future of applications built upon this technology is encouraging and could lead to a boon of revenue streams for early-in companies. Think outdoor billboards and posters, mobile ticketing in movie theaters, airports, and of course , debit-credit payment card systems at retail environments. No more magnetic card swipes, license ID's etc. NFC can be used to configure and initiate other wireless network connections such as Bluetooth, Wi-Fi or Ultra-wideband. Your smart mobile phone can sync directly with the merchants system using NCF technology.

More than one method

As with the current multiple credit card systems, there will most likely be multiple payment method devices offered. Big players include EBay Inc.'s ( EBAY ) PayPal, and the ISIS system, which is managed by AT&T ( T ) and Verizon Wireless ( VZ ). ISIS will process payments via Discover Financial Services ( DFS ).

Enter Google ( GOOG ). Their plan is to start testing a mobile-payment service at stores within the 2011 year using its Android mobile phone operating system as a basis. Rumored target areas are NYC, and perhaps San Francisco. The testing will reportedly enable consumers to pay for their purchases with mobile phones equipped with NCF technology using specially-configured cash-register systems from VeriFone Systems Inc. (PAY) at merchant locations. A host of database information including financial account information, coupons, store discount cards etc. is also reportedly going to being offered.

So what technology firms may benefit the most from the adaptation of NCF technology?

Some companies (mentioned may develop a transaction-based business model in which they receive a percentage or fee from each transaction, such as that with a merchant credit card processing account. Other potential beneficiaries are the equipment suppliers for the merchant's cash registers, and phone manufacturers as each unit will have to incorporate the new technology into them. This is seen as a must-do in order to just stay competitive with other phone makers.

Samsung Electronics (SSNLF.PK) currently markets their Nexus S phone, which allows for NFC capabilities and transactions. Nokia Oyj (NOK) and Research In Motion Ltd. (RIMM) reportedly have products in the pipeline with NFC-enabled technology.

On the patent side of things, Via Licensing Corporation, an independent subsidiary of Dolby Laboratories (DLB), is developing a patent licensing program for NFC technology.

Google is currently trading at 561.00 range with a 52-week range of 433.63 - 642.96. Their revenue stream is so vast that their involvement in the NCF technology may not even register a blip on their revenues for some time, but a long position on them could benefit an investor.

AT&T is a long shot. Currently trading at nearly 28.00 it's typically not a real mover. With a 52-week Range of 23.78 - 30.10, short term gains are not likely, even with a news disclosure of significant payment processing deal with RCF technology. Their loss of an exclusive arrangement with Apple for the iPhone was a blow, despite AT&T CEO Randall Stephenson's comments on the industry is better off with more than one supplier involved. Given that they have one of the lowest approval ratings of cellular service in the U.S., many think they are in denial.

Verizon Communications Inc. could be a long term beneficiary of implementation of this technology. At 35.00 at current, and a 52wk Range of 25.99 - 37.70 an argument could be made that they are heading in the right direction on many fronts and long-term results could be positive.

Nokia Corporation (NOK) could be positioned in a very positive way to benefit if their product materializes. Currently at 8.00, on the low end of a 52wk Range of 7.73 - 15.89, ground can easily be made up and investors can profit accordingly.

Boston-based Strategy Analytics is reporting that Apple (AAPL), Nokia and RIM together generated 64 percent of the revenue in the popular and ever-growing smart phone market.

The report by Strategy Analytics indicates that Apple had 16 percent of smart phone market volume in 2010, but a 29 percent share of revenue. Nokia was second with 20 percent of market volume and RIM third with 15 percent value share. With such a considerable market share in the cell phone market, a readily adaptable device, and an easy road to application development for programmers, one would expect that Apple would have a presence in the NCF world.

It may take 12 months or so before NCF technology greets the customer and merchants on a daily basis, but looking carefully at the early-in market players could net positive results for an investor.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

See also Bill Miller's New Stock Picks Fail to Beat the Market on seekingalpha.com



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Stocks

Referenced Stocks: DFS , EBAY , GOOG , T , VZ

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